Pressure is building to move beyond gas taxes and EV fees

By Chris McCahill 

The way we currently fund our transportation system is falling short in many ways. MIT researchers anticipate electric vehicles will account for 50% of the national fleet in 15 years and 80% by 2050, which means gas tax revenues will decline by around 30% in just 14 years. Their new study, Replacing the Gas Tax, offers a useful lens for evaluating the alternatives. 

The researchers note that many states have implemented annual registration fees for electric vehicles as a stopgap. In the long run, however, those fees will slow EV adoption and fail to provide a sustainable funding source. 

The MIT report outlines a range of funding options, many of which SSTI described in an earlier post. These include: 

  • The existing gas tax; 
  • Vehicle sale and registration fees; 
  • Road user charges, including tolls and congestion pricing; 
  • Mileage-based fees; 
  • Electricity taxes for home or public chargers; 
  • Parking fees; 
  • Impact fees tied to vehicle weights. 

The researchers evaluated each option in terms of how difficult it would be to implement and administer, how susceptible it would be to evasion, how stable it would be as a long-term revenue source, and how fair it would be across different population groups. They also considered how each option could potentially address externalities like congestion, road impacts, safety, and emissions. A new report from Transportation for America highlights similar considerations: 1) revenue stability; 2) incentives and outcomes; 3) equity; and 4) feasibility or scalability.  

Both reports suggest some version of a mileage-based fee is the most promising, especially if it accounts for the type of vehicle and traffic conditions. These payment systems typically require a GPS transponder or mobile app, which would let agencies charge higher rates for vehicles traveling along express routes or in congested areas. Even with a simpler toll- or odometer-based system, rates could also vary based on vehicle size or household income.  

Another important takeaway is buried within the two reports. Many of the gas tax alternatives could mark an important shift away from federal funding toward state revenues—or at least a notably different role for the federal government. The IIJA provides funding for a national pilot, but a handful of states are each running their own pilots and coordinating through programs like RUC West and the Eastern Transportation Coalition. Transportation for America notes: “Any new funding scheme will likely require a layered approach in which all levels of government provide thoughtful engagement, and in which each level of government may have distinct goals that require both policy coordination and shared implementation infrastructure.”  

Whatever the path forward looks like, it will also require some consideration of how those revenues are spent. Any new fees or payment systems, while they could improve revenue stability, could also increase public scrutiny of transportation spending. That could force agencies to be more transparent about how to balance investments in expansion versus preservation, operations versus capital investments, and highway projects versus infrastructure for walking, biking, and transit. 

As TransitCenter notes, rethinking the way we fund transportation could help us address the looming fiscal cliff that many local transit agencies now face. “As we look towards the phaseout of gas-powered cars,” they write, “replacing the gas tax gives us a chance to reimagine how we fund the public good that is public transit.”  

Photo Credit: Jean-christophe Gougeon via Unsplash, unmodified. License.