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Supply Chain News: Is there A Way to Effectively Collect Tax for Electric Cars and Trucks and Highway Usage?


Many Favor Vehicle Miles Tax, but Overhead would Huge, ATRI Report says, Offering an Alternative Approach

Oct. 5, 2021

The US Highway Trust Fund, which is used by state governments to maintain and improve US surface transportation infrastructure, has been challenged financially for many years, for a variety of reasons.

Supply Chain Digest Says...


Thinking also goes that the tax on electricity usage for EVs should be set so that the net cost is about on par the comparable federal gas or diesel tax.

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The biggest issue has generally been seen as the fact that the Federal tax on gasoline and diesel fuel has not been increased since 1993. That even as there has been significant improvement in efficiency by cars and trucks with regard to fuel efficiency, meaning each gallon of fuel consumed and tax delivers a lot more miles driven.

More recently, the US has seen substantial growth in the number of electric cars on the roads, with that number expected to rise sharply in coming years and be joined by a lot of growth in electric trucks of all sorts. California, for instance, intends to use an Executive Order to have 100%zero-emissions vehicle sales by 2035, and several other states have followed this lead.

Which creates a real funding problem for roads and highways, since e-vehicles are in general not contributing to highways maintenance and expansion, except for generally small annual registration fees in some states (after buyers of new e-cars were usually given substantial state subsidies for doing so).

What are governments to do?

The generally most popular proposal is to implement something called a vehicle miles tax, or VMT. As the name indicates, the idea is cars and trucks would pay for road funding base on the miles they are driven.

But how would governments capture the miles driven? How would collections happen, and how compliance be enforced?

A study earlier from the American Transportation Research Institute (ATRI) found that a VMT would require an “IRS-level” bureaucracy, draining a very large percent of the monies collected – as much as 50% or even more.

Compare that to fuel taxes, which are 99.5% efficient in net funds generation.

Now in a new report, ATRI says there may be a way to track and collect taxes for e-vehicles based on electricity consumption – similar to the way current fuel taxes work - or ATRI calls this an electric fuel tax. But there still remain many questions.

The report notes Pennsylvania has such a nascent program in place, and several other states are considering such initiatives.

But there are big challenges in terms of measuring how much electricity is being used, especially for consumer vehicles where much charging is done at home. On the other hand, public charging stations are dedicated to charging EVs, and therefore are more likely to have a dedicated meter through which electricity transferred could be easily measured.

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Capturing usage specifically for EVs by consumers will require both smart meters and smart chargers. Smart meters are prevalent. Smart charges not so much. But with both in place it should also allow variable charging rates based on time of day.

“The key to measuring residential use of electric fuel for transportation is communication between the utility (via smart meter) and the customer,” ATRI report says, adding that “this is enhanced further when the vehicle can communicate with the utility via smart charger.”

Thinking also goes that the tax on electricity usage for EVs should be set so that the net cost is about on par the comparable federal gas or diesel tax. The ATRI estimates that a tax of $ 0.021 per-kWh is such an equivalent charge – though of course many believe that federal gas and diesel taxes should be raised.

The report recommends a phased approach, where for example major fleets of EVs, especially trucks, are taxed first, followed by public charging stations and then consumers using home chargers last.

It sure seems a lot better than a VMT.

Any thoughts ATRI's research? Let us know your at the Feedback section below.




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