Cash-Strapped States Eye Self-Driving, Electric Car Taxes

Many government entities have relied for decades on gasoline taxes. With fuel efficiency and electric cars already reducing gasoline demand, and self-driving cars which may eliminate millions of truck, taxi and limo driving jobs in the offing, the search is on for new sources of tax revenue both to replace what has been lost - and to help ease the transition for those likely to lose their jobs.

The challenge, from a public policy standpoint, is how to address the needs without killing nascent innovative technologies that may have broad social, environmental and operational benefits. JL

Keith Laing reports in the Detroit News:

Cash-strapped states are considering taxing self-driving cars as they look for ways to replace revenue lost from gas tax collections that have dwindled as cars have become more fuel efficient. Legislation would impose a 2.5 cents-per-mile tax on self-driving cars. A similar measure would establish a 1 cent-per-mile fee for self-driving cars, and a 2.6 cent-per-mile fee for autonomous trucks. The traditional source of federal transportation funding is the nationwide 18.4-cents-per-gallon gas tax. The federal gas tax brings in $34 billion per year.

Some cash-strapped states are considering taxing self-driving cars as they look for ways to replace revenue lost from gas tax collections that have dwindled as cars have become more fuel efficient.

State lawmakers in Massachusetts have introduced legislation that would impose a 2.5 cents-per-mile tax on self-driving cars. A similar measure that would establish a 1 cent-per-mile fee for self-driving cars, and a 2.6 cent-per-mile fee for autonomous trucks that have more than two axles has been approved by the state Senate in Tennessee.

At the federal level, the independent Eno Center for Transportation think tank in Washington has proposed a penny-per-mile fee on automakers for self-driving cars when they are operating in autonomous mode. The idea has been endorsed by at least one former U.S. transportation secretary.

Paul Lewis, vice president of policy and finance for the Eno Center, said the proposal to tax automakers for self-driving car operation could raise up to $300 million per year that could be used to help pay for badly needed road improvements in the U.S. and make up for gas tax revenue that will be lost as automakers move toward autonomous and electric cars.

“Self-driving cars tend to be very fuel-efficient, and a lot of automakers have talked about how they are going to be all-electric,” Lewis said. “That means they are imposing the same type of wear and tear on roadways without paying into the system.”

Michigan has taken steps to position itself as a haven for self-driving car testing: The state Legislature passed into law last year a measure that allows robotic cars to be operated on any Michigan road without a driver behind the wheel. Jeff Cranson, a spokesman for the Michigan Department of Transportation, said there has no been no talk of implementing a self-driving fee at the state level.

The traditional source of federal transportation funding is revenue that is collected from the nationwide 18.4-cents-per-gallon gas tax.

The federal gas tax, which has not been increased since 1993, brings in about $34 billion per year, but the federal government typically spends $50 billion per year on roads. The Michigan gas tax was increased from 19 cents to 26.3 cents per gallon at the beginning of 2017. The hike was the first increase in the Michigan gas tax in 20 years.

Lawmakers in Washington have been searching for years for ways to close the gap without raising taxes at the pump.

Previous proposals to tax drivers based on how many miles they travel instead of how many gallons of gas they buy have run into opposition from critics who argue it would allow government officials to track movements of drivers.

Lewis said his group’s proposal for a per-mile self-driving fee would apply only when cars are operating in autonomous mode.

“VMT (vehicle miles traveled) proposals have faltered in the past because it’s tremendously difficult to put a tax on something that is historically free,” he said. “The fee is on automated driving, something that doesn’t exist yet. So there’s not a built-in constituency for it. And it’s for elites because, at least initially, autonomous vehicles are going to be expensive. So it doesn’t have this kind of tax on middle America.”

President Donald Trump has floated an infrastructure proposal that calls for spending $1 trillion to improve the nation’s roads, but his administration has committed to providing only $200 billion of it in federal money. Administration officials have said the federal seed money can be used to “incentivize” up to $800 billion in private, state and local spending on infrastructure.

At the plan’s core is the assumption that private companies would enter into “public-private” partnerships with local and state governments. Critics have questioned whether private companies will be willing to pony up enough money to pay for 80 percent of the president’s road-funding proposal, and Trump’s relationships with the business community are frayed after his two CEO panels disbanded due to the president’s remarks about racial tensions that sparked violence in Charlottesville, Virginia.

Backers of the idea of taxing self-driving cars say doing so would keep the user-fee system that has been in place since the gas tax was created in the 1930s. The idea has been endorsed by Mary Peters, a former U.S. transportation secretary, who wrote in an op-ed in The Hill newspaper that “up-to-date and well-maintained infrastructure is not only important for all road users, but also essential for successful deployment self-driving cars.

“With all the talk in Washington of a trillion dollar infrastructure package, these transformations demand special consideration,” wrote Peters, who served under former President George W. Bush. “A predictable driving environment with well-marked traffic lanes, clear signage and modern traffic signals is needed for the current technology to operate safely.”

Self-driving car supporters are leery of proposals to tax the nascent technology.

“I would say, in terms of usage fees, as a nation we need a strategy for how we fund our infrastructure repairs,” said John Maddox, president and CEO of the American Center for Mobility, the self-driving car test site in Ypsilanti. “For autonomous vehicles, I don’t see them as different than any other vehicle in that regard. There’s no difference between an autonomous battery-electric vehicle and a non-autonomous battery electric vehicle.”

Lewis, the Eno Center vice president, said his group was wary of proposing a fee that would be a deterrent to self-driving testing in light of the technology’s anticipated safety benefits. “We would not want to put a $1 per mile fee on this that would have truly have a market-distorting effect,” he said.

Lewis said automakers that are developing self-driving cars have not signaled they are vehemently opposed to the idea of being charged a penny per mile for their autonomous vehicles. He added that the proposed amount is close to the amount currently charged for the federal gas tax, noting that the average mile per vehicle if trucks are included is currently around 18 to 20 miles per gallon.

“They haven’t been super excited about, but they haven’t be allergic to it,” he said of the auto industry’s reaction to the proposal. “They recognize that we have to have a funding mechanism.”

Lewis said the idea could make sense for states like Michigan to consider. He added that privacy concerns that have been raised about other mileage-fee proposal could easily be addressed because his group’s proposed autonomous charge would be paid by auto companies, not drivers.

“How we see it working is if you get in a self-driving car and you get on the freeway and punch in your destination, Ford is now driving your car,” he said. “And they are probably going to charge you for it. So it would not be a huge data-dump to the feds.

“You’re being driving by an autonomous vehicle, so of course it knows exactly where you’re going and how fast you’re going,” he added. “If you didn’t want to have that tracking, you would turn off the self-driving mode.”