Electric Car Tax: Fees Aim To Boost Road Funds, But Some Fear They Will Punish Drivers

by Petra CameronDecember 3, 2018

Don Ryan / Associated Press

Fuel-efficient, hybrid and electric cars are called a boon for the environment, but their growing popularity means shrinking fuel tax revenues for state coffers and less money to pay for road and bridge projects. 

Susan McNease bought her Toyota Prius about four years ago. As someone who has grandchildren in North Carolina and makes the occasional trip from Jackson to New England, McNease said she loves the infrequency with which she has to refuel the hybrid vehicle.

Her Prius gets around 45 miles to the gallon, about twice as much as the Lexus she drove before. Recently, however, the Mississippi Department of Revenue informed her that she’d have to pay extra for the fuel-efficiency.

Via a new tax passed during the special session in the Mississippi Legislature, McNease will now have to pay $75 each year when she registers her hybrid. For electric car owners, the price tag is $150 a year.

“At first I thought it was a joke, and then I got mad about it,” McNease said. “I’m trying to save on fuel, I’m trying to save on money, I’m trying to save on emissions, I’m trying to cut-down on non-renewable energy. I’m doing my part.

“I found this fee that was put on my car insulting. I feel that we should be rewarded for these kind of efforts, and maybe they should be taxing big (cars) that guzzle gas more.”

The argument behind the tax – a measure many states around the country are taking – is straightforward: drivers not consuming gas, or at least as much gas, should still have to pay for the roads they drive on.

Eric J. Shelton, Mississippi Today/ Report for America

Rep. Trey Lamar, R-Senatobia, discusses infrastructure during a special session of the Legislature at the Capitol in Jackson Monday, August 27, 2018.

“The roads in Mississippi benefit everybody, and therefore everyone that uses them, as best as we can, needs to pay something towards their maintenance,” said Rep. Trey Lamar (R-Senatobia), who co-authored the Infrastructure Modernization Act. “Obviously electric vehicles don’t pay any portion of the state gas tax which is used to maintain and build roads in Mississippi.”

There are around 900 electric cars and 14,000 hybrids in the state, according to Kathy Waterbury, a spokesperson with the Department of Revenue, so the tax will only affect about 0.5 percent of Mississippi’s drivers.

But with an infrastructure crisis around the state, lawmakers wanted to capitalize on the growing fleet of cars not contributing funding through the gas tax.

Heather Brutz, a policy analyst at the North Carolina Clean Energy Technology Center, said it’s better to institute electric car and hybrid regulation sooner rather than later; in roughly ten years, she estimated, electric cars and hybrids will be able to compete price-wise with traditional vehicles.

“I think it’s smart for states to think ahead before that,” Brutz said, “because right now you’re raising the tax on relatively few people, and if you wait until [electric cars and hybrids] become 20 percent of the vehicles on the road when you raise the tax, then, first of all, that’s when you’ll have a bigger budget gap, but that’s also when you’re gonna have more people upset. So I think politically, dealing with it now before it’s an issue is smart.”

Louie Miller, Director of Sierra Club Mississippi, disagreed, arguing that the new tax will stifle the market for electric cars and hybrids.

“If you want to grow this industry, you don’t penalize it,” Miller said. “This (fee) designed for one thing, and that’s to strangle this technology in the cradle, and to penalize people who want to buy electric cars.”

Brutz said that Mississippi’s approach is “what we see more common than anything else” as far as different states’ legislation regarding electric cars. Fourteen other states considered similar legislation just this year. Below is a map of other states with similar policies as Mississippi’s. 

A flawed funding system

The question of how to tax electric car drivers for using state roads gets at the inherent flaws in relying on the gas tax to fund road repairs.

“There’s an existing problem with funding transportation, due to the fact that vehicles are becoming more fuel efficient over time,” Brutz said, “and also because the federal gas tax, and in most states (including Mississippi), isn’t indexed with inflation. So (the tax) loses its spending power over time. Due to those two factors, gas tax isn’t going as far as it used to.”

Unlike the gas tax, the new fee on electric cars and hybrids is designed to increase; starting in 2021, the fee will be tied to the Consumer Price Index, meaning it will grow annually. 

Over the last five years, revenue from the gas tax has increased by 8 percent, which Waterbury of the Department of Revenue characterized as slight and not an appreciable growth.

In March, Mississippi Department of Transportation Commissioner Dick Hall said the state needed $350 million to $400 million more per year just to maintain roads and bridges, and that it would still take years to address the backlog of highways in need of repair.

Brutz added that many of the roads and highways were built around 50 or 60 years ago, and are now reaching their expiration date.

“You’ve got a lot of roads that are reaching the end of their lifetimes,” she said. “Because of that, there is an increasing need for road repair. And that’s not because of poor planning, it’s just these things don’t last forever and have to be replaced. Because of that, there’s an existing problem with transportation funding not being sufficient.

“Anyone who works in transportation policy knows it’s an issue. You go and add a ton of vehicles that aren’t going to be paying into the system, you’re going to make it worse.”

Air quality and other concerns

Miller said the respiratory impacts of automobiles should sway legislators to encourage electric car purchases, not discourage them.

“We can talk about the environment, but at the end of the day it’s public health being impacted by tailpipe pollution,” he said. “It’s important for people to recognize this is the largest source of air pollution in this country. From that standpoint, this is real and this is an important way to reduce air pollution impacts on people’s lungs.”

Miller noted that DeSoto County, a suburb of Memphis, was listed as a non-attainment area by the Environmental Protection Agency from 2012 to 2015, meaning it didn’t meet air quality standards.

One lawmaker, Sen. Billy Hudson, R-Hattiesburg, regrets having voted for the bill after learning over a month later about the tax he helped pass. He’s now drafting a bill to repeal the tax, he told the Clarion Ledger in October.

“If you look at it, we were raising their tax and didn’t raise everybody else’s tax,” Hudson said. “We’re penalizing the people that are doing what we’re wanting them to do if we’re concerned about the environment and clearer air and less dependence on foreign oil.”

“I hardly looked at it, it was a big, big bill. I’m not making excuses, I messed up. I should have seen this,” he added.

SOURCE: Alex Rozier
VIA: Mississippi Today

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