The PA Transportation Revenue Options Commission (TROC) Final Report and Strategic Funding Proposal was recently released. It covers a myriad of financing options, given the projected demise of the gasoline tax as an effective means to fund roads and bridges. I don’t want to cover all of these as they are wide-ranging options and many go beyond my expertise. I do want to focus on a pair of options that deal specifically and only with Electric Vehicles (EV’s). One swaps out the current Alternative Fuels Tax for an annual $275 fee. This is a replay of last year’s misguided SB 845. For an EV driving the average number of passenger miles a year and getting a fuel economy 100-120 mpg-e (we will use our LEAF as the model, at 104 mpg-E), this translates into an equivalent of a gasoline tax of $2.29 per gallon. The other institutes a MBUF (Mileage Based User Fee) Pilot only for EV vehicles. To be clear, all vehicles on the road need to pay to support the upkeep of that road and associated bridges. However, the proposals with regard to EVs are punitive and unfair. They also discourage ownership of EV’s. Most agree EV’s are going to be a significant component of our future driving, if we are to address the climate crisis. The TROC Recommendations send us in the wrong direction.
EV’s in Pennsylvania are currently liable for an Alternative Fuels Tax, which is pegged to the mpg equivalencies of gas powered cars. The average passenger mileage driven each year is 12,435 (most recent numbers from 2014). A Toyota Prius gets 52 mpg and would consume an estimated 239 gallons of gasoline per year. At 58.7 cents per gallon, this yields a revenue of $140 a year. A Honda Civic gets 32 mpg and would consume an estimated 389 gallons a year. The Civic would yield a revenue of $228 a year. A Ford F-150 getting 16 mpg would consume 777 gallons and would yield a revenue of $455 a year. We own a Nissan LEAF that gets 104 mpg-e. For that average mileage, we would be consuming 120 gallons. Our alternative fuels tax would be $70, figured at $0.0172 per kWh. The Civic gets twice the fuel efficiency of the F-150, hence half the gas tax. The LEAF gets twice the fuel efficiency of the Prius, hence half the gas tax equivalent. The point of these numbers is to say that some vehicles get much better mileage than others and therefore pay much less in fuel taxes than others. Electric vehicles are the most “fuel-efficient.” And as a society we have accepted that, so far.
This is not to say the mechanisms for collecting the Alternative Fuels Tax are logical or efficient. First, it is not well advertised, either by the dealers or PennDOT at registration. Secondly, the forms are complicated and require registration of your own charger, if you have one. And you have to keep good records. I would put it at the same level of difficulty of filing state income taxes if you have a business. It could be greatly improved. I suspect collections are nearly non-existent.
For the proposed $275 in Electric Vehicle Fees, at the average passenger miles per year per vehicle, this would translate to a gas tax equivalent of $2.29 per gallon for the LEAF, not the 58.7 cents per gallon everyone else pays. Other EV’s would be in this range.
One of the principles of the Commission is to be Fair, and to produce balanced, reasonable, and responsible proposals. Why should EV’s be singled out, since there is an existing mechanism to collect the equivalent fuel taxes? The fact the TROC dismisses the existing mechanism is a flaw in the report, and support for the need to improve collection techniques. The removal of electric vehicles from the platform of equivalent fuels taxes is hardly fair and equitable. The Prius is a hybrid electric vehicle. Would it be fair to add a partial tax on these as well, since it’s partially an electric car? Hybrid owners get superior fuel economy. Shouldn’t they pay higher fees as well? In fact, shouldn’t every vehicle owner that gets good gas mileage be charged additional fees now, as they are evading the needed revenue to keep our roads and bridges maintained?
One of the principles of the Commission that is not on the list is a commitment to action on the climate crisis. A full 30% of the CO2 that will be required to be removed from our output comes from gas-powered vehicles. Getting this to zero in the next 10-15 years is critical if we are to meet IPCC goals. Tax policy is a powerful actor on behavior. We all know this, but despite the potential impacts of the Commission’s proposals on taxes, there is no acknowledgement of the need to direct some of that policy to addressing the Climate Crisis. It leads to a myopic view on revenue and at the minimum represents a missed opportunity to integrate revenue proposals with CO2 reductions. At the worst, it is a dereliction of duty for a governmental body in the middle of an existential crisis.
MBUF – Mileage Based User Fee – also known as VMT (Vehicles Miles Traveled), is a user fee that avoids the problem of fuel source. A car on the road driving a mile pays the same regardless of type of fuel. With regard to fairness, the MBUF is probably the most fair. The only other way it could be fairer is if there were a factor for vehicle weight as heavier vehicles beat up the road more than lighter ones. The TROC Report suggests an MBUF of 8.1 cents a mile in lieu of a gasoline tax (and presumably the EV Tax, although unstated.) For the average passenger car driving the average 12,435 miles a year, this would yield revenue of $1,007. Our F-150 drive would be paying more than twice what they are now in gas taxes. The Civic Driver 4x what they are paying now. The LEAF Driver 14x what they are paying now. But this would level the playing field with regard to road and bridge use.
Here’s my problem. The MBUF pilot is applied only to EV’s. As a pilot, it would begin in year 1 and could continue indefinitely. The MBUF is intended to replace the gas tax. Presumably, it would also replace the Electric Car fee. Fine, but for electric vehicle owners, it is a very expensive replacement. $1,007 versus $70, or $275 depending on how you view it: the report is not clear. Gas-powered vehicles would be spared the MBUF until much later. How is that fair?
One way to address this in a fair manner is to phase in the MBUF for all vehicles and phase out the gas tax. Start at a 0.5 cents per mile in Year 1, and increase it proportionally for 10 years until you get to the 8.1 cents per mile. At the same time, reduce the gas tax (and its alternative fuels equivalent) proportionally for 5 years until it is zeroed out. The MBUF can be calculated at registration or at inspection and collected then. That would affect everyone equally, regardless of fuel type, and by the end, fuel type would no longer be a factor in the amount collected. The TROC Report pegs the need to double the amount of revenue lost through a gas tax, so in principle, the 5 year phase out of the gas tax can be matched by a 10 year phase in of the MBUF without a significant financial impact in the first 5 years. I would note under Act 89, gas taxes more than doubled in 4 years. The MBUF would double in 5 years, between years 6 and 10.
The TROC seems hesitant to go forward with the MBUF now and wants to wait for national action. Oregon didn’t wait. Neither should we.
The Commonwealth still offers a rebate to purchasers of electric vehicles. Now, this Commonwealth Commission is recommending clawing back that rebate, through a fee just for EV’s, or an MBUF pilot just for EV’s. It seems that one hand doesn’t know what the other is doing. This may actually be likely as there are representatives of the Railroad Association, the Bus Association, Unions, AAA, Motor Truck Association, public transit, the Pennsylvania Diversity Coalition, and bicycle and pedestrian groups. None of the members either represent electric vehicle owners or appear to have any expert knowledge in the care and feeding of electric vehicles. Most of us don’t all own high-end Teslas or Porsche Taycan’s. Some of us own electric vehicles because of our commitment to the environment, not as some fashion statement.
Recommendations regarding EV’s that punish owners is one thing, but it is merely a symptom of the bigger problem. The recommendations move us further away from addressing the Climate Crisis. If the authors of the report are suggesting an urgency in acting to fix our revenue problem (and I agree there is urgency), there also needs to be a concomitant urgency in addressing the problems with gas and diesel-powered vehicle CO2 emissions. Ultimately, the TROC report is too narrow and too incomplete to be useful. If it were to be implemented, it would cease being irrelevant and begin being damaging.