Funding Local Roads in an Era of EVs and Shrinking Fuel Taxes

States can compensate with vehicle and odometer taxes, but local governments can harness new data technologies — including GPS, 5G and AI — to meet the need for more than states’ hand-me-down dollars.

Governing

By Girard Miller, OPINION

Aug. 13, 2024 

Whether or not the nation migrates predominantly to electric vehicles in a decade or so, the future of motor fuel taxes is clearly downward. Meanwhile, the costs of resurfacing and maintaining local streets and roads are not going away, but will probably escalate as our infrastructure continues to age.

If Congress cannot or will not levy new taxes to fund the nation’s freeways and bridges, it is likely that states will have no choice but to raise their taxes on vehicles. Higher automobile sales and transfer taxes seem inevitable, and it’s easy to imagine that an entirely new robotaxi industry will be taxed at the point of sale by the states, with some form of revenue sharing for local governments.

The lowest-hanging fruit for financing roads will simply be annual vehicle fees and odometer readings that state DMVs can use to assess user fees that they share with local governments, probably using formulas quite similar to those in place today for allocating fuel tax revenues. In fact, more than half the states already charge EV drivers an extra fee, and many — most notably Oregon — are testing, piloting or creating programs to charge EV drivers by the mile.

View the full article: Governing.com