The saying goes that the only sure things are death and taxes. For electric car owners in Pennsylvania, the only sure thing is death. Taxes seem to be a bit iffy. PennDOT is funded by gas taxes, registration fees, and other fees and tolls. Most of these are characterized as user fees, which over the decades has proven to be a sensible way to fund our transportation infrastructure. For 2020-21, PennDOT should get $6.9 billion for highways and bridges. Of that, 74% will come from gas taxes. Currently, the Federal gas tax is 18.4 cents a gallon, unchanged since 1993. The State gas tax is 58.7 cents a gallon. Both are folded into the pump price of gasoline. But if you have an electric car, there are no visits to the gas pump.
User Fees and the Pump
Should electric cars get a pass for helping to fund the transportation infrastructure? Having worked for DOT’s for over 30 years, I do believe that common roads and bridges, managed by government and funded by taxes and fees, are the fairest and most sensible way to maintain a transportation network. One need only look at the numerous private bridge companies, canal companies, and toll road companies that operated in the 19th century, all of which went bankrupt or out of business, leaving their wreckage to the management of the state. I presume some investors made a profit and the facilities operated in good condition for a while. Ultimately, this failed business model led to the incorporation of state highway departments and the establishment of steady funding, e.g., the gas tax in 1919. But I digress.
“Fortunately,” the Commonwealth has developed a process for collecting a user fee from electric car owners. It relies on a process known as the Alternative Fuels Tax. Each kWh that is “pumped” into an electric car is subject to a $0.0172 tax, payable to the Department of Revenue. The tax is charged at the charging station (makes sense). If you charge your electric car at a public charging station, the owner of that station is responsible for registering that station and remitting the tax on a periodic basis. If you own your charging station, as we do, that burden falls on you. You might imagine that it is a simple matter of tracking the amount of electricity used and doing a simple calculation and cutting a check. You would be wrong. This is state government, after all.
The first step is to register your charging station with the Commonwealth as an Alternative Fuels storage tank, using a Form REV-822. We did that in October 2019 and had the permit gone through, we would have received an Account ID. We finally received our ID in Late April 2021. Then we would complete and submit an Alternative Fuels Tax Report, a form DMF-101, with a check, perhaps monthly. The form never really says. This process covers “natural gas, compressed natural gas, liquefied natural gas, liquid propane gas, liquefied petroleum gas, alcohols, gasoline-alcohol mixtures containing at least 85 percent alcohol by volume, hydrogen, hythane, electricity, and any other fuel used to propel motor vehicles on the public highways which is not taxable as fuels or liquid fuels under Chapter 90.” Wood is not mentioned. (Yes, there were wood-powered cars.) Nor is the wood tax rate provided (by the cord? How many cords could a Cord burn if a Cord could burn wood?).
After waiting a year, we completed a DMF-101 for 2019 and one for 2020 and sent in our calculated taxes. Our charger does not have a meter on it, so I had to estimate our kWh usage into the Leaf. Each time we charged the Leaf, I recorded the miles travelled and the miles-per-kWh recorded in the car. That yielded the kWh used. I kept a log for each charge and totalled the kWh for years 2019 and 2020. Klugey, but workable.
I don’t consider myself particularly virtuous, but I did drink the kool-aid regarding user fees and am committed to paying our fair share for use of the road. I might be alone. No one approached me about the Alternative Fuels Tax, or how to secure a permit, or pay the tax. The Department of Revenue seemed to be a bit blasé about collecting the fees. Two gentlemen did come by and visit in November, 2019 to check out my charging station. I think they thought I was a bit crazy.
We paid our taxes for the 2,131 miles we drove in 2019 (the car was bought in September) and the 7,076 miles we drove in 2020. We are not driving a lot right now and the amount in question is less than a good steak dinner. There are probably fewer than 10,000 electric cars on the road in Pennsylvania out of over 10 million registered. Is it even worth having this discussion?
I believe so. GM is committing to an all electric fleet by 2035. California is calling for all new cars to be electric by 2035. Meeting climate goals will require the US to have a majority of its cars and trucks be electric by 2040. Relying on gas taxes to support the transportation infrastructure is unsustainable. And this does not take into account improved CAFÉ standards. Coming back to my first point that user fees are a way to support transportation infrastructure, we are going to have to come up with a fair way to collect revenue, regardless of fuel type.
The current system of collecting revenue from electric vehicles suggests the system is mysterious, broken, and failing. There are several ways this can be rectified, with and without legislation. The current method of taxation relies on measuring electric use directly from the charger. This can be modeled, relying on miles traveled and the car’s EPA-rated mpg-e. In our example, in 2020 we travelled 7,076 miles. Our Leaf is EPA-rated at a combined mpg-e of 104 miles. Using the factor of 33.7 kWh per gallon, you can estimate a miles-per-kWh of 3.09 (104/33.7). For the 7,076 miles traveled, you can estimate a use of 2,290 kWh. Taxed at $0.0172 per kWh, we would owe $39.39. All that is required to be known is miles traveled and the EPA mpg-e rating by car model.
The tax could be collected at the time of annual registration, with a line added to the form. PennDOT could provide an on-line look-up table to help. Punch in your car model and miles traveled and it will tell you the tax. Or, the tax could be collected at the time of inspection. The shop inspecting the car could calculate and add the tax to the inspection fee.
Sooner or later, VMT will have to become a larger part of the user fee equation, especially if revenue is to keep up with the need for infrastructure repair. User fees should be bifurcated into two components. The first is the fuel tax, tagged to consumption. Gas taxes would continue to be levied. Electric vehicles would be taxed at a kWh equivalency. This would reward fuel efficiency and electric vehicles, as most electric powered cars operate at over twice the fuel efficiency of gas-powered cars. The second component would be a VMT levied on all cars, which would be the purest form of a user fee. A 4 cent a mile VMT would roughly match the revenues generated from gas taxes, and together would double the total revenue, which most certainly be used to meet the current deferred need. The VMT could be phased in over several years, but would buffer the projected loss in revenue from traditional gas taxes.
Understanding we need to wean ourselves from fossil fuels, I do support a carbon fee and dividend that would also apply to gasoline. A $100 a ton CO2 fee would add a dollar to the cost of a gallon of gas. But this fee provides nothing for roads and bridges and only hastens the (good) transition to decarbonized transportation. Another discussion for another day.
Call to Action
The process for folding electric car owners into the revenue system is at best, haphazard. Most owners are oblivious to their obligations. The forms, the applications, the messaging, are all barriers to collecting revenue, especially when compared to paying the tax at the gas pump. PennDOT should be more proactive to inform new electric vehicle owners of their responsibilities. They should work with Revenue, and possibly the Legislature, to simplify the process. This will pay back handsomely as the number of electric vehicles on the roads grows.
Action is needed now if there is any hope to raise the revenues needed to maintain our roads, bridges, and transit. Recent proposals from the legislature only unfairly punish electric car owners through artificially high registration fees. Very soon there is going to be a national push to put people into electric cars. As someone worried about climate change, I welcome it. However, what good will it do when half of the cars are in the shop for repairs for pothole damage, and the other half is stuck in traffic?
On April 14, 2021, I received my Account Number to be used for my DMF-101 form.
On April 28, 2021, I learned of my mis-calculation of the DMF-101. The true rate is $0.0172 per kWh, not the $0.0137 previously reported. $0.0172 is very close to the gasoline equivalent for electric energy.