Tuesday, September 27, 2011

The Gas Tax

A friend of mine and I were debating the other day what is more egregiousness, being taxed at double the rate of the adjacent county for a car that is expensive only by virtue of it being transitional technology or that electric vehicles won't be paying gasoline taxes.

To be fair, these two taxes are at completely different levels.  The gasoline tax, currently at 18.4¢ per gallon, is used exclusively to pay for transportation and infrastructure at the federal level; the personal property tax however is a tax that is collected by the county/city and then sent to Richmond for further distribution within the Commonwealth.  Of course, Maryland and the District of Columbia don't have personal property taxes on motor vehicles so this argument doesn't even pertain to those regions.

In any case, it's easy to calculate how much federal revenue is lost by a consumer switching to an electric vehicle.  It simply depends on the amount of miles per gallon the consumer's car achieves and the number of miles driven in a given amount of time, say for a year.

Thus, for these purposes, I'll use my 2001 Toyota Avalon XLS as the example Gasoline car and compare it to the 2012 Nissan LEAF as its potential replacement.

The Avalon gets about 28½ mpg on average for my mainly highway commute.  I also estimate I drive about 24,000 miles a year in the Avalon and would drive a near equivalent amount in the LEAF since I don't take many long trips in the car either way.

Since the Gasoline Tax is 18.4¢ per gallon, at 28½ miles per gallon, that comes to about 0.645¢ per mile.  (We calculate this by dividing the cost per gallon by the American-style Fuel Efficiency; in a Metric system, we would multiply because in this system efficiency is measured in Liters per 100 km and fuel cost in cents per Liter.)  Finally, we multiply the cost per mile by the number of miles driven to get a total tax value of $154.95.

At first blush, one might assume, if I drive the same number of miles in an electric vehicle, I should be paying the same amount in Gasoline Tax that I did with my old car.  Since I can't be taxed via gasoline fuel, one approach would be to tax me through my corresponding vehicle fuel: electricity.  In this case, if I estimate 3⅓ miles per kWh as the efficiency of my electric vehicle, I use about 7.2 MWh (dividing 24,000 miles by 3⅓ miles per kWh where 1,000 kWh ≡ 1 MWh).  Dividing the target cost of $154.95 by the number of kWh used, we get 2.1520¢ per kWh.

Of course, not all the electricity I use would go to my electric vehicle.  In fact, after improving my home insulation last year, I now estimate around 21.6 MWh of household electricity usage per year, give or take a Megawatt.  Thus, my electric vehicle electricity usage is about ¼ that my total estimated household usage (7.2 MWh ÷ [21.6 MWh + 7.2 MWh]).  So if this Federal Transportation Rider were to be enacted at the household level, it would fairly be at ¼ the rate for the electric vehicle alone, or about 0.5380¢ per kWh.

Regressive Tax

The thing to note about the Gasoline Tax is that it's a regressive tax: the tax increases as the fuel efficiency of the vehicle driven decreases.  The less fuel-efficient a car, the more they're going to end up paying in Gasoline Taxes.  Generally more fuel efficient cars are more expense.  Thus the less fuel efficient cars are owned by the less affluent — for whom driving is a necessity — and by those who are least able to afford the additional taxation.

Thus, hybrid drivers, with their more fuel-efficient vehicles, pay less in gasoline taxes per mile and thus per year than people driving a car propelled solely by internal combustion.  Since an electric vehicle is even more fuel efficient than a hybrid electric vehicle — even more than a plugin hybrid electric   it would be more fair if the federal transportation fuel tax be levied at a rate that reflected the electric vehicle's inherent efficiency.  We can achieve this by calculating the tax based not on an absolute value like 18.4¢ per gallon, but rather a relative measure as a percent of total fuel cost.  Therefore, we need to compare it to the current price of gasoline.

Now, as far as gasoline prices, we seem to be piping along more or less as predicted.  And having updated the gasoline chart today, I can use the 26 September 2011 national gasoline average price of $3.56810 ($3.38410 before the tax) to compute the current gasoline tax rate of about 5.4374%.

On the other side, we need to figure out what the cost of electric fuel is in order to determine that percent cost increase.  This also varies across the country, with an average of about 11.58¢ per kWh nationally for the first 6 months of 2011 according to the U.S. Department of Energy.  However, as we're using me as an example, I would just assume use my current and potential new EV rates.  Using some complex Google spreadsheets, I've calculate my average cost per kWh including riders for 3 possible scenarios:

Schedule Average Fuel Cost per kWh Relative Gas Tax Rider per kWh Cost per kWh for Household (¼)
DOE National Average 11.58¢ 0.6296¢ 0.1574¢
Schedule 1 9.61¢ 0.5225¢ 0.1306¢
Schedule EV 6.82¢ 0.3708¢ 0.0927¢
Schedule 1EV 6.45¢ 0.3507¢ 0.0877¢

Each value is based on total electric cost, including all applicable riders and taxes.

Thus, if the government is to recoup the revenue for the Gasoline Tax on electric vehicles, it should be fairly in the 0.35¢ - 0.63¢ range per kWh used by a car or 0.09¢ - 0.16¢ per kWh per single-EV household.  And if that be the law, I would not make much of a stink were it enacted.


Compare the lost gasoline tax revenue now to the cost of the Virginia Personal Property Tax in a county unfriendly to electric vehicles like my home of Fairfax County.  As discussed in a previous post, the cost to register a Nissan LEAF in Loudoun County is currently $497.53 cheaper than registering the same car in Fairfax County.

Therefore, the revenue we're talking about at the federal gasoline tax level is about 3¼ times smaller than the property tax increase above.  So again by my calculations I have the right to be about 3¼ times madder than all those Electric Vehicle naysayers who decry the lack of gasoline tax revenue.


  1. and then up go solar panels....



    1. Ah, would that Solar Panels be affordable today in Virginia. But I like the way you think!