Should Electric Vehicle Drivers Pay Per Mile?

July 2019


Government coffers are taking a hit as drivers switch to electric vehicles and avoid paying gasoline taxes. CityLab features a recent working paper that looks at this issue by Faculty Lucas Davis and James Sallee. The researchers ask whether or not electric vehicle drivers should pay a mileage tax instead. Davis and Sallee explain how this may not be so simple after all.

“In a new working paper for the National Bureau of Economic Research, Lucas Davis, a professor of business and technology and a director of U.C. Berkeley’s Energy Institute, and James Sallee, a professor in the school’s department of agricultural and resource economics, estimate that while the U.S. does indeed forgo millions in tax revenue thanks to EVs, instituting a special tax on electric vehicles might produce unwanted side effects. Just how much is the highway piggy bank losing because of the rise of EVs? Davis and Sallee estimate about $250 million a year, based on vehicle substitution trends and average miles driven. That’s a fairly modest hit, but per EV, it seems weightier: $318 annually, according to their estimates. This impact on tax revenues is concentrated in a small number of states where EVs are most popular and gas taxes are highest: In California, where 7.8 percent of all new car sales are hybrids or electric, the state is surrendering $90 million in annual revenue.”

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