Should EVs be taxed to pay for roads? Maybe?
A modest proposal from an EV owner and policy wonk
I live in Newfoundland & Labrador and drive an EV and was initially annoyed with a recent opinion article on the CBC by Larry Hughes at @DalMIPP saying Fuel taxes pay for highways, EV drivers shouldn’t get a subsidized ride… but there’s the kernel of an argument worth examining here to better align car-related incentives and taxes.
Obviously, different provinces will have different situations, but looking at the 2022/3 provincial budget here, in a large, more-than-usually-rural and underpopulated province, the amount Newfoundland and Labrador collects in fuel tax (excluding the carbon tax) appears at least loosely similar to the amount spent on the roads — even though it goes to general revenues, not road maintenance. The province expects to collect $141m in gas tax and $89m on road maintenance. It also spent $72m on capital expenses building and improving roads and municipalities get $7m from gas taxes (presumably to help them maintain the roads in their area).
A uniform road maintenance tax based on length of journeys taken and perhaps size of vehicle regardless of fuel seems superficially logical. But it’s not clear there’s an easy unobtrusive way for annual distance driven to be collected as the author suggests, and the size and weight of vehicles has a fairly limited impact on road here — two thirds of the money spent is on snow clearance, which doesn’t vary by vehicle weight. The amounts to be gathered don’t appear to merit what could be a cumbersome and costly system to administer.
I would suggest instead we continue to hike the carbon tax (and stop offsetting its rises with reductions in gas tax as the province has done in the past) to ensure the environmental impact of ICE car travel is recognized appropriately, remove the gas tax and increase the annual license fee for car owners to make up the lost income instead — tripling it would raise $40m a year more than the gas tax does. That extra could fund a regional public transit system, a network of separated cycle lanes, support for cities to clear more sidewalks etc, taking some of the load off the roads (and serving other important goals).
As carbon taxes rise, and assuming the generous federal and provincial purchase subsidies remain, there will still be plenty of incentive for those who need cars to switch to an electric one next time they buy (when they’re available!). My modest proposal would provide an increased incentive to reduce car use altogether without imposing an undue administrative burden and would clearly separate important climate-related incentives from other reasons cars should be taxed.
I’d be curious to hear what Dr Hughes (and others) make of this idea…
