On several past occasions, I’ve written about the need for the federal government to raise the gas tax. This tax is basically a user fee that enables drivers to help pay their share of funding the building and maintenance of the nation’s systems of roads. Yet, it has remained at the same level for more than a quarter of a century now, even as our country’s backlog of desperately-needed infrastructure projects has skyrocketed.
We still need to raise the gas tax, but the time has also arrived to find a way for drivers of electric vehicles to bear their own share of this growing national burden.
A few weeks back, I wrote Tesla didn’t need another government bailout in the form of an expansion of the electric vehicle (EV) tax credit. Since then, the company announced some very impressive earnings: Tesla generated $24.6 billion in revenue in 2019 and produced a $105 million profit in the fourth quarter.
Suffice it to say, the market has found its EV winner. Any additional talk about propping up this industry with taxpayer dollars overlooks the reality of the situation.
Given the needs, shouldn’t the federal government’s transportation funding focus on repairing our deteriorating infrastructure? It was heartening to hear President Trump call on Congress to “invest in new roads, bridges, and tunnels across our land” during his State of the Union address. That message could not be timelier.
The American Society of Civil Engineers’ most recent report card gave U.S. infrastructure a D+ rating. The report covers a wide variety of infrastructure categories, from aviation to schools to ports.
Two of the report’s categories with biggest impact on your day-to-day life are roads and bridges, which earned D and C+ ratings, respectively. Structurally deficient roads and bridges go far beyond nuisance potholes – these are public safety issues that can put lives at risk.
Infrastructure investment has long been one of President Trump’s priorities, and Speaker Nancy Pelosi reiterated this week that it remains at the top of her priority list as well. It’s the rare issue in Washington that has the opportunity to unite Republicans and Democrats. But we can’t talk about investing in our transportation infrastructure without addressing funding.
Back to the gas tax. If you drive a gasoline-powered car, 18.4 cents of every gallon of gas you buy goes to the Highway Trust Fund, which the federal government uses to pay for road and bridge repair. But a growing number of vehicles on our roads, including every Tesla, enjoy a loophole that allows them to avoid paying this tax. EVs, of course, don’t use gas, and therefore don’t pay the tax.
EVs make up a small number of vehicles on our roads – 1.18 million as of April 2019 of the more than 270 million registered vehicles in the U.S. But those numbers are rising, and if Super Bowl ads are any indication, manufacturers are beginning to spend big bucks on EV advertising.
Of course, the EV push doesn’t stop there. The federal government offers the aforementioned tax credit of up to $7,500 for qualifying EVs. Telsa hit its 200,000-vehicle cap, as has GM, but the tax credit still applies to all other manufacturers.
But fear not, Tesla and GM buyers: states offer their own taxpayer-funded rebates that incentivize EV purchases, and the federal vehicle cap does not apply at the state level. Just last month, New Jersey passed a law that adds a $5,000 EV rebate on top of the federal tax credit. Unfortunately, data shows most of the federal tax credits are gobbled up by those who can afford to pay for EVs on their own – about 80% are claimed by those with annual incomes north of $100,000.
Regardless of who’s buying them, more EVs are hitting U.S. roads than ever before. They’re contributing to the wear and tear of our roads, but they’re not paying for their upkeep like the rest of us do through the gas tax.
Some states have sought to address this imbalance by administering annual EV fees. Typically these fees are a flat rate that EV drivers pay to make up for not otherwise contributing to transportation repair costs. The annual fee in North Carolina is $130, while in Ohio it’s $200. In other states, pilot programs are looking at how a vehicle miles traveled (VMT) system would address transportation funding.
State legislatures and governors recognize we’re on an untenable path when it comes to transportation funding, and most states are bound to fiscal responsibility through balanced budget requirements. They know we can’t adequately fund transportation infrastructure projects while giving some drivers a free pass. But that’s exactly what we’re doing at the federal level.
Congress ought to develop a system at that ensures that every vehicle that uses our roads also pays for upkeep, and that the limited transportation resources we have go to those projects – not to prop up auto manufacturers who are generating billions in revenue and have now become profitable. Tesla has now proven that the EV industry has grown up and is capable of competing. Let it compete.