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Arizona legislature looking to tax electric cars to help pay for highways

Proposed laws in Arizona and elsewhere would collect additional taxes from owners of electric cars, is it too soon to start collecting road use fees from electric car owners?

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Pop quiz: Who pays for building and maintaining the highway system? It's largely paid for via gasoline taxes. Another pop quiz: How much gasoline does an electric car burn? Zero. That is unless that electric car is a Chevy Volt. Last pop quiz: How will road building and maintenance be paid when all the cars are electric? Well?

Last month Arizona Representative Steve Farley proposed HB #2257 as a way to solve this conundrum. It imposes a vehicle mileage tax on electric vehicles to the sum of $.01 per mile driven. HB 2257 also empowers the Arizona highway department to collect the tax and adopt necessary rules. The tax is also tied to economic activity so that it will go up over time as GDP increases.

The issue is not new and other states are considering similar legislation. Over the years several biodiesel activists have been arrested for failure to pay road taxes, because home-brewed biodiesel is similar to a home-charged electric vehicle in that the vehicle is fueled outside the existing system for collecting road taxes.

Arizona law requires the measure achieve a 2/3rds majority to be enacted.

Another proposed law in Washington State (SB 5251) imposes a flat fee of $100 per year per electric car on top of existing vehicle taxes. This is in lieu of determining the number of miles driven per year.

There's no doubt that electric vehicle owners must pay their fair share of the cost of building and maintaining the road system. The roads don't build themselves, and they must be paid for in some way.

The existing gasoline tax is an eminently fair method to collect user fees. It's entirely anonymous and directly ties the fees paid by each individual to their actual use. Those who drive more use more gasoline and end up paying more gasoline taxes. The fairness of the system does begin to falter a bit with hybrid car owners because their cars are more fuel efficient, meaning hybrid car owners will pay less road fees per mile driven than a non-hybrid car owner.

Where the system falls completely apart are the pure electric vehicles with no gasoline engine. Today road use fees are collected based on gasoline consumption, and because a pure electric car doesn't consume electricity, no road use fees are collected.

As Jim Stack, president of the Phoenix chapter of the Electric Auto Association, said “Someday it’s all going to be hybrids and electric vehicles, it wouldn’t do us any good if we didn’t have any roads.”

However Diane Brown, executive director of Arizona Public Interest Research Group, has a warning. “Any policy that is accounting for electric vehicles should be incentivizing, not discouraging.” Most government policy on electric vehicles today is meant to incentivize their purchase, and no matter how logical it may be to require electric car owners to pay some sort of road use fee, it could be off-putting to do so.

There are many considerations in developing a new system of collecting road use fees to accommodate electric cars.

A per-mile fee is clearly fair because it makes those who drive a lot pay more. But how would one collect the data to charge a per-mile fee while also respecting anonymity? Gasoline purchasers have anonymity today in paying their road use fees, so why should electric car owners surrender anonymity? But collecting per-mile fees from electric car owners is not as straight-forward as it is with gasoline car owners because of the way electric vehicles are refueled.

There is a societal positive benefit to greater adoption of electric vehicles, and it seems appropriate as Diane Brown suggested, that policies be incentivizing rather than discouraging. That would mean foregoing a road use fee for electric car owners, for now, but a few years into the future to start collecting such a fee. What benchmark is there to tell us when policies should shift from incentivizing to collecting fees?

Would a per-year fee be good enough? Some countries charge a yearly tax on car ownership, while not charging a gasoline tax. This is simpler for the government to collect, but it lacks the fairness of a per-mile or per-gallon fee.

Making more roads into toll roads could be a way to generate road use fee income. But this would mean adding infrastructure and cost to the road system either in the form of toll booths, or in some sort of electronic measurement system. For example the government could require every vehicle to carry a transponder, and then receiver units could be installed along the roads, to directly measure how much driving is performed by each car, and directly charging the car owner based on that usage. But aren't the "big brother" aspects rather obvious? The government would know every move we make. The current system is highly anonymous.

Today there are a small handful of electric cars on the road. The cost to the infrastructure is small, today, for those electric cars to be driven around. Is it necessary to launch into a system, today, to collect road use fees from that handful of electric car owners?

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Aaron Turpen    February 7, 2012 - 10:29PM

I've often wondered why nobody talks about taxing tires instead of fuels. Tires are pretty universal: vehicles require them and the roads they use require the vehicles to have them. So until we have flying cars, the tires are universal.

If you're going to tax something to pay for roads, tax the thing that actually touches the road. Yes, that could include bicycles, neighborhood electrics, and everything else. Fair is fair. Just don't tell the fanatics at Yahoo Green that we want to tax bicycles. They'll have a fit. :)

JP White (not verified)    February 10, 2012 - 9:58PM

In reply to by Aaron Turpen

That makes a lot of sense. Thanks for that suggestion. A high mileage tire could attract more tax than a low mileage tire. There would have to be accommodations for where a premature tire failure resulting the need for a new tire would result in unfair taxation given the reduced miles. I suppose usable tread could be determined as a basis for a tax credit.

The biggest problem with taxing tires is that folks will be encouraged to run them down to the steel belt to avoid paying for new tires risking their lives and other drivers close by. Those emissions stations workers could keep their jobs and be asked to measure tire tread instead of tailpipe emissions. Bad tires - no certificate to renew tags.

Aaron Turpen    February 10, 2012 - 10:23PM

In reply to by JP White (not verified)

Those states with a safety check (most with emissions requirements also require safety) already generally have tire wear requirements as part of it. The DOT enforces a similar requirement on big rigs and commercial trucks (called the "Washington's head rule" by truckers - putting a quarter in the tread, if you can see all of Washington's head, it's almost assuredly too thin to pass).

I would think that the trade-in value of old tires (how much tread is left, whether salable or not) would be the rule of thumb for the tax. Personally, if taxes are going to be necessary, I prefer them to be as simple and fair across the board as possible. So I'd have "classes" of tire based on size (a 15" 225 is used on much smaller cars than is a 15" 275, for example) and leave tread life (in terms of how long the tire is rated for) out of it. Makes things simpler.

So if you buy soft tires for your big offroader, you pay the same as the hardened highway tires for the same truck, but you'll pay more often because you'll need new tires more often. This would encourage part-time offroaders to buy both and swap.

The trade-in value would be based on the useful life of the tire based on its possible resale value. This would mean that if your tire is ruined due to a wreck, puncture, etc., then you're kind of SOL, but personally, that's just how it is. The same happens if you get bad gas or have a hole in your fuel line and lose it all now. In my experience, the majority of road punctures, if fixed promptly, don't require tire replacement and new puncture-proofing tire designs are becoming more and more common.

The huge difference here would be that this would hit people up front in a big chunk instead of in small pieces over time as it does with fuel. The good part of that is that it makes people realize how much they're actually spending in tax. Direct taxes like this go a long way towards making people realize what their "fair share" often really amounts to and thus causes them to demand more streamlined and economical government.

To put this into perspective, we recently bought tires for my wife's Honda Civic. They cost about $100 each with mount and install. I expect to get 50,000 miles out of them, which will likely mean the rest of the car's life (it's over 165k miles now) in terms of our ownership. With a reasonable tax, I could see that tire cost doubling ($800) and would have complained, but at the same time, our tax at the pump would be gone and gasoline would be back down to under $2.50/gallon. Here in Wyoming, gasoline (as of tonight) is at $2.78/g. Subtract federal (18.4 cents) and state (14c) and gas is down to $2.46/g. Over the life of those tires, I would easily save the $400 spent in fuel tax savings.

Those are just examples, of course, sine I have no idea what kind of tire tax would be required to raise the same amount of revenue fuel taxes do. It would be a true "road use" tax, however, that doesn't require any sort of Big Brother spy tactic to measure how much "use" people are getting out of their roads (as has been proposed by some). It could also proportionately be levied on all who are using the roads with machinery, from bicycles on up to big rigs.

It would also, to appease the green crowd, not change the fuel savings advantages of alternative fuels and thus they would still be able to use that cost savings as a selling point. It does, however, screw over the "tax gasoline until no one can afford it anymore so they're forced to go electric" cultists.

JP White (not verified)    February 11, 2012 - 6:50AM

In reply to by Aaron Turpen

Good points. The fact that we will be more aware of hoem much tax we are actually paying makes me think the legilators will avoid this type of taxation at all costs. Fairness in taxation is not part of their lexicon. They'll try and sneak as much tax under our noses as they can get away with.

Sorry for being cynical, your idea is a good one, but I believe our government does not have our best interests at heart.

Frank Sherosky    February 7, 2012 - 10:31PM

If EV drivers can accept taxpayer subsidized dollars to buy their cars, then they should not complain when a few of those dollars return to take care of the roads, however it may be measured. Besides, the fee looks miniscule in comparison to the $7500 subsidy. I fail to see why there is even a complaint.

Steve EV (not verified)    February 8, 2012 - 1:57PM

I can see how this may be an urgent issue to stop those 200 or so scoundrels from avoiding about $100 per year in gas tax. Instead of buying gas, they will keep thousands of dollars in extra cash each year that could help boost the local economy. We need some of that to fix the roads.

An even bigger issue is the replacement of existing gas cars with much more efficient models. Millions of drivers are going to game the system with these new vehicles. They will keep using the roads just as much but pay less than their share when they buy less gas.

HB #2257 does not do enough. Instead of generating $20,000 per year from just the EVs we could generate millions. We need to expand it and place a mileage fee on every new car that gets more than 20 miles per gallon.

Anonymous (not verified)    February 9, 2012 - 6:59PM

Anyone who has actually researched how the gas tax is used, will realize that it is used for Highways/Freeways.
What is the current range of the average electric car? Less than 100 miles. How many freeways are these evil cars going to be using? Very few, if any.
Virtually all the money used for surface streets (where the EV will be used most of the time) comes from the general fund and property taxes.