Electric Cars and the Gas Tax

Gasoline is one of the significant non-renewable resources in our world, it has a permeable impact on our lives, social construction, environments, climates, economics, and many other aspects. Governments use a series of policies to coordinate the use of gasoline to ensure the positive operation of the world. Especially in the United States, with such a vast land, people cannot maintain their normal lives without the car, which has led to the importance of gas taxes. However, with technology innovation, electric cars have been introduced to the market. In the face of this sudden change in the automotive market, WKYT’s article brought some surveys and analysis on electric cars and gasoline cars tax policy. My paper will provide a brief overview of this article and then express my own views on this controversial issue from an economic perspective.

WKTY, based in Kentucky, describes the challenge of charging gas tax on the increasing number of electric cars driving on the pavement. The gas tax is the main source of road funds that every driver pays when refueling their cars. However, federal statistic shows that plug-in electric cars and hybrid vehicles which were registered in Kentucky have increased dramatically in the past six years. As more and more cars use less gasoline, or even stop using gasoline, and then do not have to pay the gas tax, the value of Kentucky’s gas tax is dropping gradually.

Such a situation made road maintenance and construction more difficult. How much tax is needed to be charged to drivers who don’t use gasoline has become a very controversial question. It is difficult for us to define a fair share of tax on those electric cars. In some other states, the tax electric cars need to pay are excessive, it seems like an unreasonable penalty to them. Although the measurements of gas and electric are very different, the real consumption caused by cars is the wear and tear on the road.

Senate President Robert Stivers, R-Manchester, argues that it’s hard to fairly quantify the share of payment to drivers for those wear and tear. At the same time, we should encourage the creativity of car production, and no electric car or future car drivers should be overcharged. Innovation could even reverse the traditional reliance on gas tax to achieve the road fund. Proponents of electric cars have come up with ideas to address the existing gas tax and make roads profitable, such as a mileage-based or weight-based tax, adding some toll stations in rural areas with a little charge to stimulate tourism nearby, charging an equally flat fee and so on.

An interim Committee claims that the transition from the gas tax to a mileage-based tax is not a simple issue. Owners of non-gas cars are firmly confident about their cars, they believe electric cars are safe, convenient, environmentally friendly, and cheaply maintained. With rapid increase of electric cars, the issue of gas tax becomes more and more urgent in society nowadays.

First of all, we need to figure out what the nature of the gas tax is. Gas tax is a classic example of the Pigouvian tax, which can offset the negative externality resulted from driving a car. Wear and tear on the road are undoubtedly the negative externalities caused by automotive driving, whether they are gas cars or electric cars. Thus, are there any other differences in the negative externalities between these two types of cars?

Definitely, exhaust emission is also a negative externality, the driver may not be affected by the emissions during the journey immediately, but the people behind him, the surrounding communities will be. These are all factors that exacerbate the burden on society. While the new energy vehicles are clearly doing better in this regard. Electric cars not only reduce emissions and driving noise considerably but also have higher energy efficiency.

Compared to conventional gas-powered cars, they are even with stronger performance. And the advantages above make electric cars really expensive. In this regard, The proposal, House Bill 580, which is charging electric car owners $200 annually as a highway fee is clearly a ‘penalty’. This restrains the development and innovation of the new energy market, also eliminates the profits electric cars brought for the society. 

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