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

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?