Expect More and Higher Tolls

In a post at RealClearEnergy Geoffrey Pohanka considers an interesting question. How will we pay to maintain our roads as more electric vehicles are sold?

With anticipated growth in electric vehicle (EV) sales in the United States, the question remains: How are EVs going to pay their fair share of maintaining our nation’s highway infrastructure? The Highway Trust Fund was created in 1956 by Congress to pay for our Interstate Highway System. Currently, the fund receives monies from the federal fuel tax – 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel.

The federal fuel tax has not increased since 1993, and since it is not pegged to inflation, collections are insufficient to maintain our highways without the infusion of additional funds from general revenues. The Highway Trust Fund currently has two accounts – one to fund road construction and surface transportation projects and a second for mass transit. One cent per gallon also is used to fund underground storage-tank removal. Over time, the diversion of money from the fund to pay for “non-highway” projects has been growing, making the shortfall even larger.

This shortfall is worsening as EVs take a larger share of vehicle sales. Since EVs do not use liquid fuels to propel them as do ICE (internal combustion engine) vehicles, they are not contributing to the maintenance of our highways. Some observers argue that vehicles in general should be charged a miles-driven tax. It might seem to make sense that the more miles one drives the more one should pay to maintain our roads, but there are other considerations.

I think he’s making some weak assumptions. For example, the evidence that the number of vehicle miles driven increases with the number of electric vehicles sold is not particularly strong. There may even be an inverse relationship.

Mr. Pohanka wants to impose a tax on EV use by taxing electricity at the charging station:

My suggestion: an electricity tax could be added to public EV fast-charging stations that would be the equivalent of the current fuel tax. I have found that a rule of thumb for many EVs is that they consume about one kilowatt hour of energy for every 3.5 miles of driving. If a comparable ICE car achieved 30 miles per gallon, the 18.4 cents tax per gallon would equal 0.61 cents per mile. Thus, 2.14 cents for each kWh used at public fast-charging stations could be added to help pay for our highways. This is a start, but it would hardly make up for the shortfall in revenue from EVs, since it does not account for the fact that most EVs are charged at home.

Wouldn’t Mr. Pohanka’s suggestion result in those who could electing to charge their EVs at home?

I don’t know whether Illinois is typical but there are other considerations as the Illinois Road and Transportation Association points out:

The 19-cent gas tax in Illinois was intended to be directed solely to the Road Fund and State Construction Fund and used exclusively for infrastructure improvements. However, According to the Illinois Economic Policy Institute, $6.8 billion in transportation funds was diverted by Illinois’ legislature between FY02 to FY15 in order to plug budget deficits in non-transportation related areas. In 2016, nearly 80 percent of Illinois’ voters passed a Constitutional Amendment to safeguard the Road Fund from these diversions into the General Revenue Fund. However, Illinois legislators passed a state budget in July 2017 that diverted $300 million from the Road Fund to pay for transit. Previously, the costs of maintaining and expanding came out of the General Revenue Fund. This redirection of funds has been a perpetual diversion, occurring on an annual basis — something our crumbling transportation network cannot afford to continue. Although transit rail is a vital part of Illinois’ transportation network, the gas tax is intended to be a user tax — where revenues collected are put back into the same system to pay for repairs to the road network.

Here both the MFT and highway tolls are being used to pay the pensions of retired public employees.