Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Electric Vehicles

EVs Are About to Break the Way America Pays for Roads

The gas tax pays for America’s road repair. So what do we do when everyone drives EVs?

•
A hundred dollar bill as a gas pump.
Heatmap Illustration/Getty Images

Electric cars may help the United States fix its carbon problem, but they’re about to break the way America pays for its roads.

Every gallon of gas Americans buy is taxed to pay for highway improvements and other infrastructure projects. The federal government takes about 18 cents per gallon of gas (and 24 cents for diesel), while the states, on average, charge even more.

EVs escape this tax. As the Biden Administration pushes for the majority of American cars to go electric within a decade, the nation needs a new way to fund road repairs. That is why all of us, whether we drive gasoline, hybrid, or electric, soon could be taxed on the number of miles we drive.

A vehicle miles traveled (VMT) tax has become a hot idea for replacing the gas tax in the age of electric vehicles. Federal laws — including the Surface Transportation System Funding Alternatives (STSFA) program and the 2021 Infrastructure Investment and Jobs Act (as known as the Bipartisan Infrastructure Bill) — have even included money for states to run VMT pilot programs.

Economists and policymakers love VMT for a variety of reasons. Most importantly, says Adam Hoffer, director of excise tax policy at the nonprofit Tax Foundation, this approach creates a “universal toll road” where people who use the roads the most also pay the most for their upkeep.

“Gas taxes have worked really well as the best proxy for this for almost a hundred years now,” Hoffer told me. “What we're seeing is that with electric vehicles growing in market share, we need a new tool. Vehicle miles traveled taxes seem to fit that bill really well.”

Clifford Winston, a senior fellow in economic studies at the Brookings Institution, says another key advantage is that a VMT is customizable. “It has economically desirable features that go beyond generating the revenue that would be lost as the vehicle fleet turns over from internal combustion engines to EVs,” he says.

The tax could simply charge every vehicle the same number of cents per mile. On the other hand, the government could also adjust the cost up or down to incentivize good behaviors. For example, it could charge people less per mile if they drive EVs (and more if they stick with a gas-guzzler). It could put in congestion surcharges to tempt people to avoid rush hour, or charge trucking companies based on how much weight they’re hauling down the highway.

Winston’s version of VMT is an economist’s dream where price drives every choice. He compares it to the experience of calling an Uber or Lyft, where users are presented with several options at different price points. Now, he says, imagine the same scenario when you slide into your own car and enter a destination. The vehicle’s display could show you several routes with not only different driving times, but also different charges based on distance, congestion fees, or other factors.

There are downsides to this plan, of course, and not just that people may hate its complexity. Lots of folks have no choice but to drive during rush hour, and many can’t afford to replace an older car to take advantage of lower taxes on a new EV.

Privacy is the big one, Hoffer says. If drivers are charged a flat fee per mile, they would need to report their odometer reading to the taxman. A dynamic pricing scheme could be even more intrusive, requiring a way to track us everywhere, all the time.

The simplest way to confront this issue, Winston says, is to set up a third party so the government doesn’t have all this tracking data at its fingerprints. “A private company collects all this [information], sends it to the vehicle owner monthly, and says, here's your bill. Pay it,” he says. According to Hoffer, drivers already hand over this data when they sign up for car insurance programs like Progressive’s “Snapshot” that charge people based on how they drive. However, he says, privacy law around these issues is far from clear.

“There have been court cases before where lawyers have used real-time tracking data from these kinds of apps in lawsuits against people,” he says. “I think there are real questions about whether this data could be accessible via a warrant.”

There are less intrusive ways to replace the gas tax. Some states have begun to charge higher annual registration fees for electric cars to make up for the fact that they don’t burn gasoline. But a flat fee is a blunt instrument that can’t account for how far people drive. It also discourages EV sales.

An obvious replacement for taxing gas by the gallon would be to tax electricity by the kilowatt-hour. But you can’t really replicate the old system. While it may sound simple to tax fast-charging stations, lots of EV drivers do most of their charging at home. The electricity specifically used to charge a car is mixed in with the juice they use to run the dishwasher or the AC, making it hard to differentiate (not to mention that residential electricity is already taxed).

VMT may be the most logical solution to the gas tax problem, Hoffer says, but there are still plenty of bugs to work out. States currently running pilot programs, led by California and Oregon, are experimenting with how to practically implement the fee and how much it should be. It’s possible, Hoffer says, that a VMT will exist alongside the gasoline tax, at least while the U.S. car fleet goes through its transformation from gas to electric.

“I don’t see rapid adoption nationwide of a vehicle mile travel system — but I do think it is on the inevitable side of things,” he says.


Get the best of Heatmap right in your inbox:

Green
🔒

You’ve reached your free article limit

Subscribe to Heatmap News for unlimited access to daily energy and climate coverage.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Q&A

Why the Wilderness Society Backs a Data Center Moratorium

Talking with Dan Hartinger, the land conservation group’s senior policy director.

The Q&A subject.
Heatmap Illustration

This week’s Q&A is with Dan Hartinger, senior policy director for The Wilderness Society, a prominent land conservation organization in D.C. that this week called for a moratorium on data center development on public land. The public statement was relatively scant on details about the group’s stance, and a decade of reporting on policy in Washington has taught me that its positions are quite influential, especially in more traditional outdoor recreation and conservationist circles that are also often bipartisan. So I reached out and asked if someone could further explain the society’s position, and Dan obliged.

The following chat was lightly edited for clarity.

Keep reading...Show less
Yellow
Hotspots

Data Center Outrage Catches Up to Renewables Outrage in Michigan

Plus more of the week’s biggest development fights.

The United States.
Heatmap Illustration/Getty Images

1. Central Michigan – I regret to inform you of this back-and-forth between candidates running for Congress and a would-be constituent because it’s a warning sign for the renewable energy sector (and sort of broke my brain).

  • This week brought the first and likely only debate between Rep. Tom Barrett and Sunrise Movement cofounder Will Lawrence, who are locked in a tight contest over the Michigan 7th congressional district. As I’ve written, their race is a must-watch not only for control of the U.S. House but also the political fortunes of the data center sector.
  • The debate contained a remarkable exchange: Moderators played taped remarks from Paula Caltrider, identified as “a local resident” in the city of Mason to ask the candidates a question about data centers. Instead, she offered a comment. “You know, you can’t be a part of this no data center movement without renouncing the large solar farms and dangerous battery storage facilities that power these data centers.” (Quick TL;DR on Caltrider: She’s been quoted in national media coverage of the data center backlash and last year won a legal settlement after allegedly being fired for refusing a vaccine mandate.)
  • Barrett then ran with Caltrider’s baton. “I appreciate Paula linking these together, the stripping away of local control that took place in pursuit of this Green New Deal agenda in Lansing that took away control from communities” – a reference to the state’s primacy law that other Michigan Republican candidates have opposed.
  • Lawrence, whose support for a federal data center moratorium made him a national political test case, did not take the bait, nor did he criticize renewable energy. Instead, this part of the debate became a tit-for-tat about whether the sitting congressman once backed tax breaks for data centers. “He stuck his finger up into the wind, saw which way it was blowing, did a complete 180 on this issue,” Lawrence said. Then Barrett and Lawrence got into a confusing back-and-forth about whether the Inflation Reduction Act was a giveaway to data centers.
  • To the best of my knowledge, this is the first time the Data Center Trojan Horse has reared its ugly head on any kind of prominent debate stage, but it won’t be the last. For example: The Wisconsin gubernatorial debate is Oct. 21, and we’ve warned you about that one.

2. Doña Ana County, New Mexico – I suggest you pay closer attention to the federal permitting fight playing out over Oracle’s Project Jupiter.

Keep reading...Show less
Yellow
Spotlight

The Data Center Backlash Is Coming for Permitting Reform

The Senate’s compromise bill enters the chat at a moment when federal land and anti-pipeline advocates are already quite activated.

The Capitol and a data center.
Heatmap Illustration/Getty Images

The AI data center backlash is getting louder in D.C. ahead of the midterms – and it’s poised to collide head-on with the new permitting reform deal being negotiated in Congress.

This week, major environmental advocacy organizations are taking large public steps to lean in on the data center fight. The League of Conservation Voters and Natural Resources Defense Council, I’ve been told, are imminently announcing a $250,000 ad buy in the Washington, D.C. market focused entirely on decrying fossil fuel-powered data centers and Trump administration policies to speed up their construction. The Wilderness Society, a prominent land conservation organization, announced it now supports a moratorium against data centers on “public lands” focused on the roughly half billion acres under the Interior Department’s stewardship. And Earthjustice on Thursday did a detailed report claiming that 80% of the data centers under development “bringing their own power” are going to rely on gas generation.

Keep reading...Show less
Yellow