Electric Vehicles and the (Almost) Free-Rider Problem
Electric vehicles (EVs) are gaining popularity thanks to their fuel economy, but in Missouri they offer their owners another benefit—one that comes at the expense of other drivers. EV drivers contribute significantly less to road maintenance than drivers of internal combustion engine (ICE) vehicles.
Road upkeep in Missouri is paid for primarily by federal and state fuel taxes, and to a lesser degree by vehicle registration fees. Here’s what the average Missouri ICE-car driver pays in taxes and fees:
- Between Missouri’s state gasoline tax (17.4 cents/gallon) and the federal gas tax (18.4 cents/gallon), drivers pay 35.8 cents in taxes per gallon.
- The average Missouri motorist drives roughly 17,400 miles per year, and (as of 2018) the average fuel economy of all cars on the road was about 25 miles per gallon.
- So: 17,400 / 25 = 696 gallons of gas used.
- 696 ×35 = $249.11. The average driver pays this amount each year in gas taxes to help maintain the roads they drive on.
EV drivers don’t buy gas, so they don’t pay a gas tax. However, EVs still cause wear and tear on the roads, so shouldn’t their owners pay their fair share to keep those roads maintained?
Missouri policymakers seem to have recognized the imbalance, which is why EV drivers pay $75 per year in registration fees, which are put toward maintaining the roads. This fee is between 1.5 and 4 times higher than registration fees for ICE vehicles (depending on taxable horsepower), but still not close to the average of nearly $250 per year in gas taxes that ICE vehicle drivers pay.
While it appears that a simple fix for this problem would be to raise the EV licensing fee to $250, that wouldn’t be fair either. EV drivers would then pay the same amount for road maintenance whether they drive 5,000 or 25,000 miles per year.
So Missouri’s two systems for collecting taxes to fund road maintenance are troubled: a per-gallon gas tax that doesn’t apply to EV drivers, and a flat annual registration fee that doesn’t connect road usage to the amount paid to maintain the roads. Neither system is fair, and the cost of sticking with them is only going to get higher as more people drive EVs.
Tomorrow I’ll explore ways that mileage-based fees could help Missouri fund its road and highway system in a way that is fairer to all drivers.