We Should End Tax Giveaways to Electric Vehicle Owners

It’s no secret that America’s highways and bridges are crumbling and that federal and state Highway Trust Funds are underfunded, wasteful and raided frequently to finance other pet projects, such as California’s ill-conceived “bullet” trains.

Many major highways, such as I-95 between New York and Washington, I-90 in Chicago and I-5, I-10 and I-405 in Los Angeles, barely can handle current traffic. More vehicles are added every month, making congestion worse. Continuing deterioration of the roads means more traffic jams, driver stress, road rage and accidents.

Yet the owners of electric vehicles (EVs), who drive on the same roads as everyone else, are exempt from paying the taxes earmarked for building and maintaining transportation infrastructure.

That is no surprise, since the taxes are levied on gasoline purchases and EV drivers don’t buy gasoline. But it doesn’t make sense when you consider the fact that electric vehicles, because of their weight, cause just as much—if not more—road damage than conventional vehicles. It is unfair, therefore, that only drivers of conventional cars must contribute to repairing roads and bridges—and financing new ones—while EV owners get free rides.

Equally problematic is the $7,500 federal tax credit that’s available when a new EV is purchased. The tax credit (or “tax expenditure” in Washington-speak) essentially is a subsidy that encourages upper-income Californians and other well-heeled individuals, to purchase electric vehicles; it already has cost taxpayers billions of dollars. Some states have sweetened the subsidy, adding up to $5,000 in income-tax credits for buying electric vehicles, exacerbating the shortages in their state highway funds.

As of this writing, the federal tax credit applies to the first 200,000 EVs sold by an auto manufacturer. Both Tesla and GM have reached that limit, but a coalition of EV companies and environmental activists is seeking to expand the credit.

As is so often the case, the cost of the credit is borne mainly by the majority of drivers who can’t afford to buy expensive EVs and rely on conventional gasoline-powered vehicles to commute to and from their jobs. Most of the beneficiaries of the tax credit are upper-income individuals who purchase EVs for environmental reasons and would do so with or without the tax credit.

The net result is that highway trust funds, already underfunded, are being shortchanged further, as government entices more drivers into EVs.

The shortfalls emphasize the political influences under which the trust funds operate, namely concessions to “greens” at the expense of everyone else.

Given the expected increase in the number of EVs in the years ahead, America’s roads and bridges likely will deteriorate even more and perhaps more rapidly, without meaningful changes to the funding system.

As a matter of fairness for all drivers, the federal tax credit for EVs should be eliminated and EV owners required to pay a tax that would go toward supporting federal and state highway trust funds. Sen. John Barrasso (R-Wyo.) has introduced a bill that would establish an annual tax for EVs and other alternative fuel vehicles to replace lost revenue from the gasoline tax.

The nonpartisan Manhattan Institute estimates that ending the federal tax credit for electric vehicles would save taxpayers $20 billion over the next decade.

Given that the number of EVs sold last year in the United States reached 361,300, or 2 percent of total cars sold nationwide, it is clear that a road-use tax on EVs—paid either at the time of purchase or annually—would do much to improve the financial condition of the highway trust funds. It’s astonishing that Congress hasn’t demanded such a change.

For reasons of equity alone, highway funding should be the responsibility of EV owners and drivers of gasoline-powered cars alike. They share the roads; they need to share the costs.