Should Electric Vehicle Drivers Pay a Mileage Tax?

Should Electric Vehicle Drivers Pay a Mileage Tax?

In many countries the revenue from gasoline taxes is used to fund highways and other transportation infrastructure. As the number of electric vehicles on the road increases, this raises questions about the effectiveness and equity of this financing mechanism. In this paper, we ask whether electric vehicle drivers should pay a mileage tax.

Key findings

Using newly available nationally-representative microdata we calculate that electric vehicles have reduced gasoline tax revenue in the United States by about $250 million annually.This is equivalent to $318 annually for each of the 782,000 electric vehicles in the United States as of 2017.

We find that the foregone gasoline tax revenue is highly concentrated in a small number of states.

Coady et al. (2018), calculates that the optimal tax for gasoline vehicles in the United States would be $2.23 per gallon, which includes $0.60 per gallon for environmental externalities plus $1.63 per gallon for traffic congestion and accidents. This second class of externalities tends to be similar across electric and gasoline powered vehicles. Thus, while adopting an electric vehicle can potentially reduce environmental externalities, it does very little to reduce these other negative externalities.

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