Gas taxes vs. vehicle-mile fees

Electric Vehicles (EVs) have been a hot topic in Hawaii in recent months. There was an EV Life blog in the newspaper and feature articles in a local magazine and on a local television station. There have been discussions about the drive, the car’s styling, driving range, car prices, state rebates, federal tax credits, electricity rates, charging stations, and more.

But the one thing I didn’t consider, until I read an article in the Hawaii Reporter, is the effect of EVs on gas taxes. With more EVs on the road and (ideally) fewer gas vehicles, there will be less gas pumped – and less gas taxes collected.

How will lower gas tax collections affect the budget for road repairs and maintenance?

In an article titled “Vehicle-Mile Pricing: an Idea Whose Time Has Come, but How?” Randal O’Toole, a public policy analyst and Cato Institute Senior Fellow, has an answer: vehicle-mile pricing. He suggests eliminating gas taxes and replacing it with vehicle-mile fees, on a state-by-state basis. O’Toole cites an Oregon test system, which has people pay fees when they pay for gas, based on data from a GPS unit on their car. EVs could pay fees when they go to a recharging station.

I haven’t heard any hints that vehicle-mile pricing is being proposed in Hawaii, but I think we should be ready to debate it. Just think:

* Hawaii leads the nation in electric vehicles, with 422 EVs sold in 2011, or 1.2% of all car purchases; compared to the national level of 17,345 EVs or 0.1% of all car purchases (Sustainable Business. 6/16/12).

* Hawaii leads the nation in electric vehicle charging stations, with one charging station for every 5,500 residents (Pacific Business News, 3/29/12).

What happens to our roads and our driving habits if Hawaii reaches our goal of 40,00 EVs on the road? Here are some of the pros and cons of the vehicle-mile fee issue:

Pro: All drivers pay fees for actual miles driven (instead of gas taxes).
Con: None that I can think of.

Pro: All drivers pay fees for actual roads driven. [Optional for Hawaii]
Con: It could reduce the maintenance of rural roads. It infringes on privacy (even if no data is sent, GPS systems can be hacked). It’s hard to implement, hard to calculate, and hard to audit.

Pro: Vehicle mile fees can reduce vehicle miles traveled, reduce congestion, encourage public transportation, and reduce urban sprawl.
Con: It could raise the costs of public transportation. It could reduce urban sprawl (it is both a pro and con, depending on how you feel about cities and suburbs).

Pro: EVs and fuel-efficient cars pay the same fees.
Con: It could reduce the incentive to design, manufacture, and buy fuel-efficient vehicles.

Pro: Fees are transparent (not hidden in the price at the pump).
Con: Fees are harder to calculate fees or spot an error, especially if different roads have different fees.

Of course, the whole vehicle-mile fee idea depends on 1) repealing federal and state gas taxes, and 2) implementing the technology to accurately and securely track vehicle miles (and possibly roads), transmit the data, and calculate the vehicle-mile fee. Government is always eager to add new taxes, but unwilling to repeal taxes.

Do you think vehicle-mile pricing is a good idea? What other considerations are there? How can we pay for our roads and highways?

Explore posts in the same categories: Government, Taxes

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One Comment on “Gas taxes vs. vehicle-mile fees”

  1. We have more and more hybrid and electric cars on the roads. “There were 1,044 hybrids and 94 electric cars sold during the first five months of this year. That’s compared to 1,342 hybrids and 307 electric cars sold in all of 2011,” reported Pacific Business News (“Sales of hybrid and electric cars in Hawaii outpace 2011,” 6/26/12). How will this affect the budget for road maintenance?

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