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Study: Electric vehicles are leaving a growing pothole in Michigan gas tax revenues

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Steve Carmody
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Michigan Radio
“We’re looking for pilot project that moves this year, this legislative session for full and fair electric vehicle road revenue collection that will give us the answers about a future forward road funding model that works for Michigan,” said Denise Donohue (right), CEO of the County Roads Association of Michigan.

A new study finds increased use of electric vehicles could seriously reduce gas tax revenues needed to pay for the upkeep of Michigan’s roads.

EV owners pay no federal gas tax and their state registration fee does not fully replace state gas tax revenue. A study by the Anderson Group estimates the state of Michigan lost approximately $50 million in gas tax revenue due to motorists turning to EV’s.

Currently, the percentage of electric vehicles on Michigan roads is in the single digits. But the percentage is expected to rise to between 15% and 25% by the end of the decade.

Study author Patrick Anderson estimates by the year 2030, Michigan could lose $95 million in gas tax revenues annually. His study finds unless something is done, Michigan stands to lose up to a half billion dollars over the next seven years.

“If we fail to make policy changes soon we’ll be unable to maintain our roads,” said Anderson.

A coalition of state and county road groups are calling on state lawmakers to come up with a pilot program to get more tax revenue from EV drivers to maintain roads.

Possible options include:

1. Annual flat registration fees 

Since drivers of EVs pay a lower road user fee than ICE vehicles on average, increasing the registration fee for electric vehicles to match the counter-factual revenue generated from motor fuel tax paid by ICE vehicle owners may bridge the revenue gap and equalize the road user fee for electric and ICE vehicles.

2. Mileage-based user fees Traditionally, taxes for road usage were designed to ensure that drivers in Michigan would be the ones to bear the cost of the state’s maintenance for that privilege. Since MBUF is based on miles driven, it adheres to this ideal by ensuring payment toward road funding is commensurate with road usage.

3. Per kilowatt-hour fees A Per Kilowatt Hour Fee (PKHF) is similar to the motor fuel tax and the MBUF in that it also ensures that drivers pay for road usage proportionately. PKHF measures road usage based upon the units of electricity used instead of miles driven.

4. Miles at registration fees This type of mileage-based user fee requires EV owners to provide their mileage to the Secretary of State through odometer readings reported during annual registration.

5. Tolling Toll roads could help generate revenue by charging fees to road users regardless of the type of vehicle, or the driver’s residency status. However, because toll roads are expensive, time consuming, and potentially inefficient, they are not feasible as a sole solution.

The options on the table face several obstacles, including privacy concerns and legislators reductant to create new forms of taxation.

Denise Donohue is the CEO of the County Roads Association of Michigan.

She wants state lawmakers to take action, this year.

“We’re looking for pilot project that moves this year, this legislative session for full and fair electric vehicle road revenue collection that will give us the answers about a future forward road funding model that works for Michigan.”

Donohue says, unless something is done now, the condition of Michigan’s roads will grow worse.

Steve Carmody has been a reporter for Michigan Radio since 2005. Steve previously worked at public radio and television stations in Florida, Oklahoma and Kentucky, and also has extensive experience in commercial broadcasting.
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