An Open Letter to Governor Wolf
In the recent lame-duck Pennsylvania Session, our legislators in their infinite wisdom have sent forth Senate Bill 845. It is a relatively simple bill that substitutes a $175 Electric Vehicle Road Use Fee (EVRUF) fee on electric vehicles each year in lieu of the current alternative fuels tax. More for electric buses, less for electric motorcycles. This is legislation that punishes electric car owners by imposing on them a “fuel tax” more than twice that for a gas-powered vehicle. While all car owners should be contributing to the maintenance of our state’s highways and bridges, this particular method hurts for several reasons.
The Electric Vehicle Road Use Fee (EVRUF) is Excessive
The $175 Fee is presented as a Road Use Fee. Gas-powered vehicle owners pay a Pennsylvania gas tax, which currently is $0.587 per gallon. This is in addition to a Federal gas tax, but for purposes of this discussion, we are only comparing Pennsylvania taxes. The average Pennsylvania motorist drives 12,435 miles per year. They are rewarded if they buy a fuel-efficient vehicle as opposed to a gas guzzler. If you are the average motorist driving a Toyota Corolla Hybrid that gets 52 mpg, you will end up buying 239 gallons of gas and paying $140 a year in Road Use Fee taxes. If, on the other hand you are driving a Jeep Grand Cherokee Trackhawk that gets 13 mpg, you will end up buying 957 gallons of gas and paying $562 a year in Road Use Fee taxes to the Commonwealth.
One of the attractions of an electric vehicle is that they are “fuel” efficient. Although they do not consume gasoline, the EPA has rated electric cars in mpg-e, i.e., miles per gallon electric equivalent. The four most common electric cars in Pennsylvania are the Nissan Leaf, the Tesla Model 3, the Chevy Bolt, and the Ford Focus Electric. They average 113 mpg-e among them, more than twice the efficiency of a hybrid like the Corolla or Prius. If you could treat them as gasoline equivalent, for the purposes of exacting a Road Use Fee, this fleet averaging 113 mpg-e would consume the equivalent of 110 gallons of gasoline, yielding $64 in gas taxes. In this model, fuel efficiency is rewarded with regard to tax.
In fact, there is a mechanism for electric vehicle owners to pay a road use fee. It is called the Alternative Fuels Tax, and like the gas tax, is charged at the pump as it is used. In this case, though, the pump is a charging station. The owners of charging stations, including individual electric vehicle owners who have home chargers, owe the Commonwealth $0.0172 for each kWh put into their vehicles for fuel. A REV-822 form is submitted to the Department of Revenue to register a charging station, and a DMF-101 form is used to report the alternative fuels consumption. It is possible to convert mpg-e into kWh. Our fleet of electric vehicles would consume 29.83 kWh for each 100 miles driven. Driving the average 12,435 annual miles would require 3,709 kWh in electricity. At the rate of $0.0172 per kWh, our average electric vehicle would owe $64 for the year, which matches up nicely with the gasoline equivalent model previously estimated.
Both methods for estimating the Road Use Fee come up with $64 for the year. The proposed $175 per year Road Use Fee is almost 3 times as much as for an equivalent gasoline powered vehicle, if by equivalent you mean a gas-powered car getting the same mpg-e. To put it another way, it is the same as adjusting through legislation the fuel economy of an electric car to 41.7 mpg. If you drove a Kia Optima Hybrid, a Ford Fusion Hybrid, a Lexus ES Hybrid, a Toyota Avalon Hybrid, a Honda Accord Hybrid, a Toyota Camry Hybrid, a Toyota Corolla Hybrid, a Honda Insight Hybrid, or a Toyota Prius Hybrid – if you drove any of these cars, you would pay less in Road Use Fees than any of the fleet of electrics cited above. Each group gets good gas mileage, but only electric vehicles don’t use gas.
The Electric Vehicle Road Use Fee (EVRUF) is Punitive
The Fee as implemented would charge each electric car owner an additional $175 at registration. Regardless of the miles to be driven that year or future ownership, the Fee is applied at the beginning of each registration year. If for any reason, the full year is not driven, the fee is still paid.
Secondly, the Fee is irrespective of mileage. Whether you drove 25,000 miles a year or 8,000 miles a year, it is still the same $175. That is not a road use fee. It is an excise tax. This last year, we drove a total of 7,258 miles in our Nissan Leaf. We used a total of 1,892 kWh as measured. We should owe $32.54, not $175.
The Fee is targeted toward electric vehicles, even though there are several non-EV cars that generally pay less in Road Use Fees. Natural gas or fuel cell (hydrogen) vehicles are not considered, yet they also would use the roads and pay much less in Alternative Fuels Tax than the average gas-powered car.
The Electric Vehicle Road Use Fee (EVRUF) Exposes a Real Problem and Finds the Wrong Solution
The Federal gas tax is almost 90 years old, but hasn’t been changed since 1993. Bill Clinton was in his first year as president. Whitney Houston’s “I Will Always Love You” was the number 1 song that year. Beanie Babies and the World Wide Web were introduced that year. And the gas tax was raised to 18.4 cents per gallon, where it remains today.
Pennsylvania’s gas tax has grown due to Act 89. Ten years ago it was 32 cents per gallon and has nearly doubled since. However, even those increases do not address the current need in revenue to maintain the current infrastructure of roads and bridges, which has been estimated at $7.2 billion beyond existing revenues, which has come mostly from the gas tax.
The future does not look cheery and the original model of relying on gas taxes to build and maintain our highway system no longer works. The Federal Highway Trust Fund, originally funded by gas taxes, has run out of reserves and is being propped up by appropriations from Congress. Which means it is running in the red. Inflation has taken it’s toll. In 1993, the Federal tax represented 16% of the cost of a gallon of gas. Today it is 7% of the cost of a gallon. Fuel efficiency has been increasing, despite presumptive relief from the Trump Administration, and will continue to increase, further reducing revenue, as the tax is pegged to the gasoline consumption, by the gallon.
Finally, we get to electric cars and other alternative fuel vehicles, such as hydrogen. In 2018, there were a million electric cars on the road in the US, out of a total number of 274 million registered vehicles. The UK has committed to selling no new gas-powered cars by 2030. California has committed to phasing out new gas-powered cars by 2035. This is the future, whether we like it or not. Even before gas-powered cars are eliminated from our market, the percentage of electric vehicles will hit 50% possibly in the next decade or so. What of the premise basing infrastructure repair on gasoline sales? Failing quickly.
Currently, there are all of 7,700 electric vehicles on Pennsylvania’s roads today. At $175 a pop, the Commonwealth would reap a gross of $1,347,500, or about 2/3 of one bridge replacement. Squeezing electric vehicle owners isn’t going to solve any of the massive problems facing our roads and bridges. However, focus on electric vehicles does illuminate the problem. Unfortunately, the legislature is finding its solutions in the wrong places.
VMT, or vehicle miles traveled is a concept that has been around a long time within DOT’s. So has the concept of assessing road use fees based on miles driven. In some ways, this is the fairest and most stable form of funding as it more truly reflects the actual use of the highways. If you go to the hardware store and buy a gallon of paint, you pay your 6% sales tax. If you buy 2 gallons of paint, you pay twice as much tax. Simple as that. The more you use the more you pay. A VMT-based tax would include on an equal footing electric or hydrogen vehicles and would de-link revenue with fuel efficiency.
If we are to consider fuel efficiency a virtue, then the best approach might be to keep a gas tax in some form and blend it with a VMT, so that there would be some advantage to having a fuel-efficient vehicle, but that everyone would pay something to maintain the roads and bridges.
While our legislators seem to have put their finger on a problem, they’ve lunged for the wrong solution. They should try again. Governor Wolf, you should veto this legislation if it gets to your desk.