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American lawmakers can't make up their mind about how best to meddle in the market

Gas taxes have long been a stable source of revenue for states.  In Feb. 1919 Oregon introduced the first gas tax -- $0.039 USD/gallon ($0.53 USD/gallon in 2014 dollars).  Since then, every other state has jumped onboard.  Average rates have remained relatively unchanged, at around $0.315 USD/gallon, on average (state only).  At the federal level a smaller gas tax accounts for $25B USD in revenue -- 60 percent of which goes to federal highways, and 40 percent of which goes to federal budget earmarks (a notorious source of corruption).  The federal government in 1993 raised this tax to $0.184 USD/gallon in an effort to balance the budget and boost fuel efficiency.
Today you wind up paying, on average, roughly half a dollar in taxes to your state and federal government per gallon of fuel you buy.
But the federal government is worried.  After pushing so hard with ambitious Corporate Average Fuel Economy (CAFE) standard, the government is now wondering if it went to far, as soaring fuel economy sinks state tax revenues.

Vehicles like the Ford Fiesta can average 45 mpg on the highway even without hybrid tech
Kristina Egan, the director of Transportation for Massachusetts, is among those concerned.  Her group promotes large public transit projects, which are highly dependent on state and federal dollars.  She comments:
We are going to continue to rely on the gas tax for quite a while to maintain the safety of our roads and bridges.  But it is really important for us to start exploring sources to supplement the gas tax as cars become more fuel-efficient.
Between this year and 2040, annual sales of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEV), and battery electric vehicles (BEVs) are expected to double in the New England area, according to projections by the U.S. Energy Information Administration (EIA).
The effects of that increase have already been felt.  A Dec. 2013 report by the U.S. Environmental Protection Agency (EPA) brought bittersweet news.  Between 2004 and 2012, high oil prices and federal regulation helped to increase the average fuel economy of American vehicles by 22 percent.  The downside, of course, is that effectively amounts to a 22 percent decline in tax revenue.

President Obama's "test drive" of a Chevrolet Volt plug-in hybrid back in 2010. [Image Source: AP]
Jeffrey Mullan, a former Obama administration Secretary of the U.S. Department of Transportation (DOT) between 2009 and 2012, says that states are eyeing tolls to restore revenues.  He comments:
We need to develop a new proxy, and for me, the easiest and most useful option — and the one users are more familiar with — is tolling.  I predict we will see more tolling as a solution — partly because people are familiar with it, but also because states are beginning to take matters into their own hands.  They’re relying less on federal resources to finance their own programs.
The Massachusetts and Chicago turnpikes are among the most highly trafficked highways to feature high tolls.  While critics fear that increasing tolls and rolling back restrictions on interstate tolling could raise the cost of products -- due to higher truck delivery costs -- the movement has some high-profile backers.  Last month, President Barack Obama joined the list of supporters for rolling back federal restrictions on interstate tolling.
If tolling is the Democratic National Party's answer to falling gas tax revenues, fees on EVs and hybrids is another prospect being explored by the Republican National Party.  Massachusetts State Rep. Bradley H. Jones, Jr. (R), introduced an amendment to a bill which would have charged an additional $100 USD registration fee [PDF] on electric vehicles.  The amendment was struck down, as even Rep. Jones' party colleagues were skittish about appearing to punitive towards "green" vehicles in an election year.

Some have called for taking on extra fees for electric vehicles like the Tesla Model S
Rep. Jones defends the plan, though, calling it a natural development, explaining:
That person who switches to an all-electronic vehicle, they’re paying nothing for the benefit of the upkeep, maintenance, and filling of potholes on the roads.  The issue is really one of equity.  Eventually, you’ve got to have that discussion.  If everybody ultimately switches over to electric cars, what would you do?
Barbara Anderson, the executive director of Marblehead, Mass. advocacy Citizens for Limited Taxation, was moderately supportive of the idea despite the fact that it represented more regulation and fees -- something her group typically opposes.  She states:
I think there’s a balance you have to strike.  We want to have an incentive for people to buy cleaner cars. But we don’t want that incentive to be so much that only people who are using gas are paying for roads and bridges.
Some states are going for a more overt option -- simply increasing gas taxes.  But that raises the risk of a backlash.  In Massachusetts, the gas tax was raised for the first time in two decades from $0.21 USD/gallon to $0.24 USD/gallon.  The hike led to much public outcry.  Some have advocated scrapping the gas tax entirely.  A local petition gathered 100,000 signatures -- enough to put the question on the ballot for Massachusetts’ voters this fall.  Now Massachusetts state officials have to deal with the possibility that they could soon have no gas taxes, losing what was before the increase a $677M USD revenue source.

[Image Source: Ocala Post]
A final solution that some Republicans and Democrats are considering as a way to "Trojan horse" EV taxes into the system is to offer mileage taxes.  Such taxes could still target vehicles like hybrids, and could also charge gas vehicles at a high rate, when all the numbers are crunched.  Oregon is on the eve of a trial program with 5,000 volunteers whose cars will be GPS-tracked in order to calculate an annual tax bill.  The volunteer test kicks off next year.
Mr. Mullan isn't so sure that idea would work, though.  He warns:
The reaction is often, 'Why do I have to pay more? Don’t punish me.'  New things are difficult to implement, especially when people are just not 100 percent certain of it.
By the sound of it no one can quite agree on how to handle the revenue crisis created by rising fuel economy.  Or in other words, this has been another federal edition of "be careful what you wish for."

Source: Boston Globe

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Fuel Economy?
By Reclaimer77 on 6/2/2014 5:55:31 PM , Rating: 5
Yeah I don't think so. We have an economy in the crapper, gas prices are sky high so people are driving less, and we have millions of people still out of work and NOT driving every day.

I want to see some proof that rising fuel economy all of a sudden is causing a budget crisis, before I'll accept new taxes.

This is just a pretense for squeezing even more lifeblood out of the population, before this whole budget crisis implodes and takes us all with it. And it's REALLY scary when the Republicans and Democrats are finding ways to agree on tax increases. That can't be good for anyone.

Revenues down? Do like everyone ELSE has to do, and SPEND LESS!!!!

RE: Fuel Economy?
By Shig on 6/2/2014 6:02:34 PM , Rating: 1
The economy isn't in the crapper, the Dow is setting records. Corporate profits are at all time highs, yet things don't seem to be trickling down.

RE: Fuel Economy?
By Reclaimer77 on 6/2/2014 6:33:51 PM , Rating: 5
LMAO yeah no sh*t, the Fed is pouring billions and billions every month into the stock market. Of course it's looking good!

Look at Main street, not Wall Street. Things look a bit different.

RE: Fuel Economy?
By BansheeX on 6/2/2014 10:43:23 PM , Rating: 5
Indeed. Not only is the FED buying up tons of government debt and bad mortgages still, interest rates have been at 0% for a LONG time. Interest rates are very important for generating savings from which real loans come. They're also important in making sure that loans go to the people who are the most likely to increase production and pay it back (businesses). Right now, a bulk of the credit is going to spending: student loans, house loans, car loans, basically everything that isn't a factory. Meanwhile, our enormous trade deficits widen and we continue to import everything on borrowed money so that even more of our future tax revenue will be squandered on interest.

RE: Fuel Economy?
By FITCamaro on 6/3/2014 9:57:49 AM , Rating: 4
$60 billion a month to be exact.

RE: Fuel Economy?
By TSS on 6/2/2014 8:35:53 PM , Rating: 2
Ahh.. yknow what instead of another long winded economics post ima just say, play with google a little if you really think that.

As for gasoline, MPG might've gone up but barrels of gasoline consumed has only dropped since mid summer 2007, it was down 5,5% end of last year (up a little from 2012). Considering a 14,3% inflation during the same period and it'd might account alot more for why the lawmakers are worrying about gas taxes, rather then EV's. If the market for cars stays the same size but EV+hybrid sales double it'd still be only 6% of total by 2040. Not exactly something to worry about.

RE: Fuel Economy?
By overlandpark on 6/2/14, Rating: -1
RE: Fuel Economy?
RE: Fuel Economy?
By KCjoker on 6/3/2014 6:20:17 PM , Rating: 2
You've obviously never heard of Quantitative easing then.

RE: Fuel Economy?
By sorry dog on 6/8/2014 1:27:53 PM , Rating: 2
QE is A.K.A. printing money.

Printing money = inflation since it devalues existing money.... Yet gov't says inflation is close to 0 and says they are worried about deflation.

Either some kind of new economics is going on or at least economic reporting is being distorted...

I'm leaning to the latter to explain QE vs. no inflation dilemma.

RE: Fuel Economy?
By frakkel on 6/2/2014 6:07:27 PM , Rating: 3
The last comment was probably the only thing that matters.

People should use only for what they could afford nothing more. What we have been seeing around the globe is that people are using money that they dont have. This is the reason to why we have this so called crisis.

RE: Fuel Economy?
By NellyFromMA on 6/3/2014 7:56:12 AM , Rating: 2
Spending is fun on someone else's tab.

RE: Fuel Economy?
By amanojaku on 6/2/2014 6:21:12 PM , Rating: 5
First of all, I'm not sure how Jason got the federal government mixed up in this. It's the STATES that are proposing these taxes.

And there is no crisis yet. The states are worried that EVs will CREATE a crisis due to reduced gas consumption. So the goal is to preempt expected loses. The rationale is that gas taxes pay for roads and other infrastructure, so EV and hybrid drivers aren't paying their fair share. That may be true in the future, but today there is no crisis and there is no nation-wide effort to raise the gas tax.

RE: Fuel Economy?
By stm1185 on 6/2/2014 6:45:00 PM , Rating: 2
With the rise of electronics maybe they just make an energy tax.

RE: Fuel Economy?
By Nutzo on 6/2/2014 6:49:21 PM , Rating: 2
Huge difference between Hybrid and EV's

An EV like the Nissan Leaf is paying no gas taxes, ant the buyers even get a huge tax rebate when they bought it.

A plugin Hybrid (like the Volt) might be paying some gas taxes depending on if they take longer drives.

A Hybrid DOES pay gas taxes. For example, a 4 cyl Camry XLE is rated 35 MPH highway, the Camry Hybrid XLE is rated at 38MPG Highway, not much of a differnce. There are some 4 cyl and disels rated at over 40 MPG, so I don't see a real need to charge extra taxes on Hybrid.

For the people who point out that Hybrids get much better mileage in town, you need to realize that the state gas taxes pays for HIGHWAYS, not the local city roads. Local roads are general paid for by local property taxes.

If they are so worried about tax revinue, why don't they drop the huge tax rebates for electric cars? If that's not enough, then add a fee/tax to the registration of any car that plugs in (EV or plugin Hybrid) based on the size of the battery?

RE: Fuel Economy?
By Mint on 6/2/2014 7:27:52 PM , Rating: 2
We need a better highway revenue system period.

Light duty vehicles do far, far less road damage per gallon than an 18-wheeler. There are gobs of studies about this. Technology is much better now at registering vehicles and tracking mileage, so we can do much better.

Charging taxes on EVs to match gas car revenue is like putting more white people behind bars for recreational drug use to match rates of minorities. It's only "fair" in the stupidest sense of the word.

RE: Fuel Economy?
By Reclaimer77 on 6/2/2014 7:53:32 PM , Rating: 3
Last time I checked EV's use the roads, so umm yeah, they need to be taxed like everyone else. And it's going to take more than a racist analogy to say otherwise.

As for a better highway revenue system, hey, I have a radical idea:

1. Take the money collected for the highways.
2. Actually USE that money FOR the goddamn highways.

Problem solved.

*drops mic on stage*

RE: Fuel Economy?
By amanojaku on 6/2/2014 8:16:46 PM , Rating: 3
I think Mint was saying that putting people in jail for recreational drug use is stupid, and that minorities are unfairly jailed for drug possession. Therefore, the fair solution would not be to imprison more white recreational drug users, but to stop arresting people for non-violent recreational use.

It's not a racist analogy, because statistics show that minorities ARE unfairly jailed for minor drug offenses and receive harsher sentences than whites. This is one reason why people are constantly calling for prison reform, because the number of non-violent criminals in prison is bankrupting the states and leading to more crime. Prisoners don't pay for themselves, and people with criminal records have a hard time finding jobs, leading many return to their previous actions or worse.

Back to cars... 18-wheelers do significantly more damage to roads than passenger cars, but there's no point in taxing them more. They work for businesses who pay significant sums in taxes already, and there are less 18-wheelers on the roads than there are passenger cars. EV and hybrid owners should pay an equivalent tax to replace the gas they don't use. The point isn't the gas, it's the roads, and those drivers are using them just like everyone else.

RE: Fuel Economy?
By StormyKnight on 6/3/2014 1:21:31 AM , Rating: 2
Back to cars... 18-wheelers do significantly more damage to roads than passenger cars, but there's no point in taxing them more. They work for businesses who pay significant sums in taxes already, and there are less 18-wheelers on the roads than there are passenger cars. EV and hybrid owners should pay an equivalent tax to replace the gas they don't use. The point isn't the gas, it's the roads, and those drivers are using them just like everyone else.

RE: Fuel Economy?
By Mint on 6/3/2014 1:59:48 AM , Rating: 1
Thank you for explaining to Reclaimer my simple analogy.

But you're wrong about not wanting to tax 18-wheelers. If they're responsible for most road damage, then they should pay for it. What businesses pay in other taxes is an orthogonal issue. More importantly, if one company's shipping ruins the roads 100x as much as another, it should pay 100x as much in road taxes. It shouldn't be spread evenly among all companies, or among light duty drivers.

RE: Fuel Economy?
By amanojaku on 6/3/2014 1:58:55 PM , Rating: 2
For you and StormyKnight (and everyone else, obviously):

The truecostblog link is unreliable. None of the links he has work anymore, so you only have his numbers to go by. And he's an unknown without any references, so who knows if his information is accurate and his conclusions valid. After all, he just performed a bunch of paper exercises without retrieving actual data.

Here's what I found from the Federal Highway Administration:
Based on the findings of the American Association of State Highway Officials (AASHO) road test, damage caused by heavy trucks was long thought to increase with approximately the fourth power of the axle load. This means that one axle of 10 tons on a heavy truck was 160,000 times more damaging to a road surface than an axle of 0.5 tons (car scale).

In recent years, however, it was determined that the relationship between axle weights and pavement damage is complex and varies based on numerous variables, including environmental factors, type of terrain and roadway design. The National Pavement Cost Model (NAPCOM), which is the pavement model currently used by FHWA, estimates that for some types of pavement deterioration, doubling the axle load causes 15 to 20 times as much damage; for other types of deterioration, doubling the load only doubles the damage.

The U.S. Department of Transportation in its most recent Highway Cost Allocation Study estimated that light single-unit trucks, operating at less than 25,000 pounds, pay 150 percent of their road costs while the heaviest tractor-trailer combination trucks, weighing over 100,000 pounds, pay only 50 percent of their road costs.

Table 2 from the following link shows that the largest trucks pay between 50% and 60% of their total highway cost (including road damage) in taxes and fees (equity ratio). Who's picking up the rest? Not small cars (equity ratio of 100%) - it's vans, SUVs, and light trucks (check figure 5 for a graphical comparison of equity ratios).

RE: Fuel Economy?
By Mint on 6/3/2014 2:59:33 PM , Rating: 2
Good find. Ideally I'd like a little more detail about how the cost allocation was broken down, and certainly would like more recent data given that driving habits have changed, but in the meantime I'll withdraw my claim.

From that data, cars do indeed have a large share of road cost, and EV road taxes makes sense.

RE: Fuel Economy?
By JediJeb on 6/4/2014 12:07:12 AM , Rating: 2
Another question is how many other taxes do the trucks pay that most vehicles don't. They pay excise taxes on 18 tires instead of just 4 for example and the tax on their tires is at a higher percentage than those for light cars. I have family who are owner/operators and the taxes and fees they pay is unbelievable.

RE: Fuel Economy?
By Solandri on 6/4/2014 3:03:32 PM , Rating: 2
Truck tires, in addition to being bigger, are typically inflated to 80-120 psi, vs 30-45 psi for car tires. So even if trucks are paying an excise tax per tire, they're still paying less per pound of road loading than passenger car tires.

e.g. A 3500 pound passenger car is putting 875 pounds of load per tire onto the road. An unloaded semi truck and trailer is about 32000 pounds, which divided over 18 wheels is 1778 pounds per tire. Fully loaded it can hit about 80,000 pounds (40 tons), or about 4444 pounds per tire. By this math, not only should the truck be paying an excise tax on all 18 tires (vs 4 for the car), its excise tax per tire should be about 5x higher than the car's.

Given some of the traffic flow problems I've seen in Los Angeles, I actually think it makes sense to create dedicated truck highways in urban and suburban areas, funded entirely by taxes on trucks.

RE: Fuel Economy?
By Reclaimer77 on 6/4/2014 4:52:00 PM , Rating: 3
Yeah lets increase the costs of shipping through higher trucking taxes. Because that TOTALLY wont screw over everyone...

RE: Fuel Economy?
By Spuke on 6/4/2014 12:35:57 PM , Rating: 2
*drops mic on stage*

RE: Fuel Economy?
By thesaxophonist on 6/4/2014 9:27:05 PM , Rating: 2
For example, a 4 cyl Camry XLE is rated 35 MPH highway,
Really lives up to Toyota's reputation, doesn't it? Snide remarks aside, you're right. Just drop the tax rebates. I don't think a special fee on EVs is fair, but they shouldn't get any special treatment the other way, either.

RE: Fuel Economy?
By FITCamaro on 6/2/2014 8:27:21 PM , Rating: 2
Well speaking truthfully, there isn't any reason that electrics shouldn't pay some tax since they're not buying gas. Those taxes exist to pay for roads. Either get rid of the taxes and make it up in other ways (sales tax) that effects everyone equally, or electric vehicle drivers should have to pay in some way for the road wear they cause. Not get to drive on them for free at the cost of everyone else.

At the state level there is nothing wrong with this. The federal government should get out of all road projects though other than the interstates at most. But honestly I'd be for them getting out of that as well. As I've said before, the interstates serve a military purpose so I'm not against the federal government being involved with them. But that's where their influence should be strictly limited. No more federally subsidized state transportation projects that only benefit commuters of a state.

RE: Fuel Economy?
By FITCamaro on 6/2/2014 8:29:42 PM , Rating: 2
And let me say that I'm most for getting rid of gas taxes and making it up through sales taxes. It's the only fair way to tax everyone. Otherwise you have to employ a complicated system where gas vehicles just pay the gas tax, hybrids pay the gas tax plus a small fee, plugins pay gas tax plus a slightly higher fee, and electrics pay the highest fee since they use no gas.

RE: Fuel Economy?
By FITCamaro on 6/2/2014 8:53:29 PM , Rating: 3
And yes I agree that a big part of the reason revenues are down is because of the pathetic work force participation rate. When you have no money, you drive less.

RE: Fuel Economy?
By retrospooty on 6/2/2014 9:28:52 PM , Rating: 3
"Revenues down? Do like everyone ELSE has to do, and SPEND LESS"

+1. It sounds perfect. It seems simple, no, I take that back it doesn't "seem" simple, it IS simple... Why in the F$%K is it so hard for the govt. to grasp? The 100b deficits of 30 years ago didnt raise an eyebrow. When we broke 250b and 500b it was just another milestone. Now its 1 trillion and still they refuse to cut with even a shallow blade. WTF?

RE: Fuel Economy?
By stimudent on 6/3/2014 12:51:59 AM , Rating: 2
The politicians are just going to have to find new ways to screw the average citizen.

"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997

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