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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: 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:
quote:
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.
http://www.fhwa.dot.gov/policy/091116/03.htm

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).

http://www.fhwa.dot.gov/publications/publicroads/9...


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...


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