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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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RE: Mileage Tax
By Nightbird321 on 6/2/2014 6:59:40 PM , Rating: 2
Mileage tax just encourages faking odometer readings. Gas tax is meant as a proxy for mileage*vehicle weight tax. More miles or heavier vehicle=more taxes, and you can't fake the amount of gas you buy.

If gas vehicles are more efficient today, and we want the correct proxy to get tax to build/fix roads, there really isn't any option other than increase tax: Use 20% less gas >> increase tax per gallon by 25%. Consumer pays same tax towards roads but less for the gas itself = savings.

Pure EV is where the issue is at, which may end up being a one time tax at purchase which would make them less appealing.


RE: Mileage Tax
By Spookster on 6/3/2014 1:05:53 PM , Rating: 2
Tampering with the odometer is already against Federal and State laws so go ahead and tamper with it. If you get caught you'll pay way more in Federal and State fines, increased insurance premiums, attorneys fees and a whole slew of other costs.


RE: Mileage Tax
By FITCamaro on 6/3/2014 3:28:16 PM , Rating: 2
That only punishes everyone without a hybrid. They're paying a disproportionate share of the costs since a hybrid isn't really wearing the road any less than a non-hybrid of similar size and weight.

A 2013 Prius weighs a little over 3000 pounds
A 1.8L Chevy Cruze weighs pretty much exactly the same.

But you're saying the Cruze should pay more to drive on the road than the Prius. Which it currently still does.


RE: Mileage Tax
By Nutzo on 6/3/2014 4:08:06 PM , Rating: 2
The Cruze Eco, with the turbo 1.4-liter, is rated at 42MPG Highway. The Prius is rated at 48MPG on the highway.

Based on 15K miles, the difference would be around 45 gallons. At a gas tax of $.40/gallon (not including sales tax as that doesn't go directly to the roads). that means the Pruis Hybrid driver pays around $18 less in gas taxes for the year. Someone driving an all electric Nissan leaf would be avoiding around $140 in gas taxes (assuming a gas version would get the same mileage as the Cruze Eco).

It's not worth complicating things to try an collect an extra $18/year from someone driving a Prius. It's the all electic that's getting a free ride, and should probably have yearly tax added to the registration (mayby $100 for a small car like the Leaf, and $200 for something larger like the Tesla)
That would be alot simpler that a mileage tax.

If the state would quit stealing the gas tax money, and instead use it just for the roads, I doubt we would need more taxes. However, if we do, then they should just raise the gas tax a few cents. that would have the added incentive for people to buy more efficent cars.


"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA














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