Taxing Issues: How Will the Feds Handle EVs?

Last Updated Mar 8, 2009 8:20 PM EDT

When people use the word "tax" and the phrase "electric car" in the same sentence, they're usually talking about the lucrative tax credits you can grab onto by buying one.

But there's another way to look at the tax issue. Suppose, as many analysts are now concluding, the bulk of the car fleet shifts from gasoline to electric. Will we tax EV recharges the way we now tax gas (at 18.4 cents a gallon)? Dr. Lyle Dennis, whose website champions Chevrolet's plug-in hybrid, asks, "Will they raise taxes on electric rates and make EV recharging more expensive? It's an important question."

It seems to make more sense to simply switch to a "vehicles miles traveled" tax that's agnostic on how cars get around. Mileage could be tracked with GPS devices installed in cars. But that's off the table for now. Transportation Secretary Ray LaHood said his department was studying the idea, but an Obama spokesman quickly denied it is now or ever will be U.S. policy.

The feds are not going to simply abandon such a lucrative source of revenue, especially since it's the major source of highway and bridge maintenance. In fact, the National Surface Transportation Infrastructure Financing Commission wants to raise the gas tax by 10 cents a gallon. And it thinks we should consider the VMT tax, too.

The amount of money the U.S. Department of Transportation takes in from gasoline taxes was down $71 million in fiscal 2008 from the year before because we're driving much less, and doing it in more fuel-efficient cars.

Last December, the Federal Highway Administration said, was the 14th straight month in which vehicle miles traveled (VMT) declined on American roads. In 2008, we used 5.25 billion (with a "b") less gallons of gasoline than we did in 2007. In December itself, travel on all roads was down 1.6 percent, which is 3.8 billion vehicle miles.

So even if we didn't go electric we'd probably have to do something about gas tax revenue. According to the New York Times, a mileage tax has been tried in pilot form only by the state of Oregon, but it seems an idea worth exploring. It needs some tweaks--without adjustment, as the Times notes, a Hummer would pay the same as a Prius. But fine tuning such a tax for fuel efficiency would not seem to be a huge task.

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