Last updated on 2018-06-07
Apparently raising taxes on drivers makes Republicans say really silly things. When Governor Daugaard wanted to raise our gasoline tax, he had to say silly things like “restore the purchasing power of the gas tax.”
Yesterday it was Republican tax-hiker Mary Duvall who had to euphemize. Pitching her new $100 annual tax on electric cars and $50 tax on hyrbids (House Bill 1241), the Pierre Representative told House Transportation that we charge drivers 28 cents per gallon of gasoline or diesel to obtain 58% of our road funding. Alas, “a subset of vehicles”—electric and hybrid cars—”are not making this contribution to the state’s infrastructure.” Rep. Duvall says she wants to “provide an opportunity for those electric vehicles to contribute….” Stung by an opponent’s charge that HB 1241 penalizes electric car drivers, Rep. Duvall said, “The single opponent used the word penalize; I prefer to use the word equalize. This is an issue of fairness. There’s a group of cars that are using our roads but they’re really not helping pay their fair share of the way.”
Now I get it: when I advocate a trust tax and a progressive state income tax to replace our regressive sales tax on food and other necessities, I need to reframe it as an opportunity to contribute: “A certain subset of our population is not making a contribution to the state’s transportation, education, public safety, and regulatory infrastructure commensurate with the benefits they receive. My reforms provide an opportunity for those trust beneficiaries and other millionaires to contribute and pay their fair share of the services they use.”
Rep. Duvall averred that her electric-car tax is not “capricious or punitive but… a measure of fairness.” Senator John Wiik (R-4/Big Stone City) testified that it’s not fair that he buys all sorts of gas for the big heavy four-wheel-drive truck he chooses to drive everywhere because it might snow while electric car drivers bypass the gasoline tax.
Matt McCaulley, lobbying for the Alliance of Automobile Manufacturers, offered a brilliant, detailed rebuttal that destroyed Duvall’s arguments on both practical policy and philosophical grounds. Firing up his slideshow, McCaulley noted that a Tesla driver already pays more taxes (via the excise and licensing taxes) to support our roads than does a driver of a standard gasoline-powered Honda CRZ. He said some all-gasoline cars get better mileage than similar hybrid models, meaning the drivers Duvall targets with this bill are already paying their fair share compared to drivers of similar cars. He said that electric cars made up 0.004% of the 922,000 vehicles registered in South Dakota in 2016 and thus aren’t putting any disproportionate drag on our road budget. (Earlier, DOT Secretary Darin Bergquist said HB 1241 would have raised just $276,000 last fiscal year.)
Most interestingly to me and to my fellow aficionados of Lincoln-Douglas debate, McCaulley appealed to the principle of “technology neutrality.” He said HB 1241 singles out one specific automotive technology for a tax while ignoring a variety of other technologies that automakers use to improve fuel efficiency (and thus evade fuel taxes). For instance, automakers are replacing steel with aluminum to make their cars lighter… so should the state impose a tax on vehicles with higher aluminum content? McCaulley said the government should not pick winners and losers in automotive innovation; instead, the government should adopt “technology neutrality” and allow automakers to decide what technology is best for maximizing fuel economy.
Rep. Duvall took rebuttal time but offered no real rebuttal. Instead of digging into the specific points McCaulley made, Duvall simply dismissed his data-driven analysis as a “distraction.” House Transportation rolled right along with her, merrily disregarding McCaulley’s superior policy argument, “technology neutrality,” and their own Republican low-tax party principles and voted 8–3 to advance HB 1241 to the House floor. (To their credit, Republicans Drew Dennert and Tim Goodwin joined Democrat Shawn Bordeaux in voting against this punitive tax.)
Matt McCaulley usually represents the corporate overlords whom I loathe and Republicans love. But yesterday’s committee vote on Duvall’s electric car tax shows Republicans will ignore corporate lobbyists and vote for higher taxes if it gives them a chance to punish South Dakotans who adopt green technology.
Gas prices fluctuate. If gas is $2.35 we pay it. If gas is $2.55 we pay it. Prices swing wildly sometimes, and we pay them. So why the opposition to increasing the gas tax by a couple of cents to maintain our roads and bridges? We wouldn’t even notice the difference in price.
South Dakota collects sales tax on electricity sold. It does not collect sales tax on gasoline sold but instead collects a per gallon tax. Electric vehicles are already paying a state tax on the fuel electric vehicles use in the form of a sales tax, adding this per vehicle fee only on electric vehicles amounts to double taxation.
Depends on how the budget is set up…if the only money for roads is coming from gas taxes, then sales tax on electricity won’t do anything for road infrastructure. If it is all one big pot of money, then perhaps they could shift monies around as needed, but I think there may still be extra costs associated with brand new infrastructure.
For example, you are going to have to address the recharging infrastructure, the ability to recycle or dispose of batteries, new power plants/energy farms and transmission lines, and the oversight of those entities. Those costs would be on top of maintaining roads and bridges.
Our Hybrid 2010 Prius and our gas 2013 Cruze ECO get the same great mileage. Drive either one at 80MPH against a prevailing wind and they both suck gas. Diesel cars and pickups get up to double fuel mileage of gas powered vehicles but dare not tread there, huh Mary? The renewal price for South Dakota license plates just keeps going up and up but that just isn’t enuf inflicted pain for our “underpaid” legislators.
Nick, I agree that Duvall’s tax would double-tax electric car owners. But from her roads perspective, could she argue that the sales tax on electricity isn’t going to support the roads?
Of course, if she argues that, then I would suggest she get back to real fairness, as she defines it as taxing all road users based on their fuel and road usage, and do some simple math: take the number of electric vehicles registered in South Dakota, multiply that by the average number of miles a car travels each year in South Dakota (both of these stats appeared in yesterday’s hearing), and divide that figure by the average “miles per kilowatt” electric cars get to obtain the estimated amount of electricity used for road travel. Then divide that kilowattage by the total electricity sold in the state, then divert that percentage of the sales tax on electricity to the highway fund.
Of course, as was suggested in committee questioning, many cars, electric and otherwise, are registered in South Dakota but never drive here, since out-of-staters take advantage of our relatively cheap licensing. To fairly and accurately tax our electricity for road usage in South Dakota, we might want to subtract from the electric car count any registrations sent to out-of-state mailboxes or RV rental boxes.
Or how about this: let’s drop the fuel tax entirely. Instead, when we renew our vehicle license plates, the treasurer checks our odometer. Then the state charges us a per-ton, per-mile use tax: miles accumulated since last renewal multiplied by weight of vehicle multiplied by some scaling factor representing an estimated cost per ton per mile.
Example: I drive a 1.5-ton VW Beetle. I put on 10,000 miles a year. It gets 30 mpg on warm days when I drive easy. By those figures, the current 28-cent-per-gallon gasoline tax costs me about $100 a year ($93.33, actually, but let’s round up).
A comparable fuel-independent tax would charge me two thirds of a penny per ton-mile that I put on the road. Treasurer Sheila Enderson comes out, checks my odometer, sees I put on 10,000 miles last year, multiplies that by 1.5 ton and then by 0.667 cents… $100 to help pay for the roads.
A Tesla Model S which might weigh 2.5 tons, driven the same amount of miles, should put more stress on the road than my lighter VW Beetle. Thus, the ton-mile use tax would charge that Tesla $167 for that year’s driving.
A Ford Super Duty pickup truck weighs 4 tons, maybe more. Stick with 4 ton, multiply that by 10,000 miles and my ton-mile use tax, and the pickup driver pays $267 for her wear and tear on the roads.
Does that sound fair?
The Ford Fusion electric has a curb weight of 3900 pounds. The regular one is around 3500 depending on the version. So the electric version would pay more in the ton-mile proposal. And it is likely that maintenance costs and/or frequency of maintenance is related to the total ton-mile traffic on the road.
That is not to say that someone would not opt for a smaller electric vehicle that weighs less and costs less. But many will want the same size car they have now, just as an electric.
Cory; you are on it. Heavy vehicles cause exponentially more road damage than light vehicles. Light passenger vehicles cause negligible road wear or damage. The science and math is long settled. Here’s a table that even a SD legislator could understand.
We ought to tax those who damage the roads.
https://streets.mn/2016/07/07/chart-of-the-day-vehicle-weight-vs-road-damage-levels/
Technically, the ton-mile plan also needs to account for the weight of the passengers and their cargo. It’s not like they become weightless when they enter the vehicle! So one can come up with an average and go from there instead of weighing everybody.
It sounds like the $50 or the $100 is somewhat of a ballpark idea, so if it under-funds road maintenance it could be an issue. If it substantially exceeds fair road maintenance costs, then it could be framed as being punitive. One could figure out how much gas one would have bought, and therefore how much gas tax is really being by-passed annually.
That’s fine, Robert. The issue at the heart of HB 1241 is alleged road maintenance, not fuel type or use. If everyone switched to heavier electric cars, the roads would require more maintenance. Thus, a ton-mile tax would be more proportionate to actual road maintenance needs, right?
Heck, I’ll even pay the ton-mile tax on my bicycles. If I get 2000 miles in on my 25-pound Trek (that’s a high estimate, and I spread my miles around on three bicycles), I’d pay 17 cents.
John! Great chart! If you can find the formula (and I assume there’s some per-wheel issue to factor in), we could make an awesome ton-mile tax chart that would fairly assess everything that moves on the road!
Let’s take this to crackerbarrel—I’ll get policy wonk Drew Dennert to propose a ton-mile hoghouse! Hoghouse!
Oh no, Robert! You’re not tricking me into making this a fat tax! You want drivers to weigh in at the treasurer’s office? No way! Strictly vehicles. Who rides in your car and how big they are—we’re not touching that. :-)
If I read what I found on google correctly, California plans to start charging a 100.00 dollar fee per year on all
non-emission vehicles in lieu of gas taxes beginning in 2020.
Just so you know.
My wife and I are leasing a 2017 Ford Fusion Hybrid and we love it.
Stupid question. How is the $100 for electric cars and $50 for hybrids be collected? License plate fees?
To me this is totally backwards. There should be tax credits for buying or leasing electric and hybrid cars. We should encourage people to buy these cars. and go green.
I filled my hybrid up this morning and paid taxes on that gas.
Upon further google research, there are now 17 states
charging a fee for electric cars, so it’s not exactly a
new idea.
17 states—that fits with information given in committee yesterday, Edwin!
But if 17 other states all jumped off a cliff, would you jump, too?
Cory, it’s time for you to use your head. Funding for road repair in an age
of electric vehicles is a legitimate concern, a conversation that needs to
be had. The fuel tax worked quite well because it was proportional to miles
driven and also the weight of the vehicle.
I doubt that checking the odometer on every vehicle is a practical
solution but possibly it could work. It sounds like an administrative nightmare.
What are your solutions? A fee on electric vehicles cannot be dismissed out
of hand. Solving this is going to require some very serious thinking.
I don’t understand- if money doesn’t influence pols how can mere weight influence pavement? Better ask Marty.
Doc, same as a carbon tax, correct? Or nuclear waste disposal in every aspect ect. “you are going to have to address the recharging infrastructure, the ability to recycle or dispose of batteries, new power plants/energy farms and transmission lines, and the oversight of those entities. Those costs would be on top of maintaining roads and bridges.”
Electric cars are not inherently clean because they can be powered by coal. It’s just that we would prefer they be recharged by cleaner energy sources, which we have via wind and hydro.
Nuclear has had a fund for waste disposal, and until recently utilities (i.e. customers) with nuclear plants paid into that fund. So taking care of the wastes in this case should simply be part of the cost of doing business.
Just like a carbon tax. So far fossil fuels and other addictive industries have been able to lobby around real costs of production.
OK, I see where you are going that.
I guess you don’t really want to call it a tax, because then it sounds like one is punishing clean energy and alternative vehicles. But one is really just being responsible with the costs that are necessary.
Those costs may seem high, particularly since they would be new…until you include end-of-life-cycle issues and long-term environmental or health effects that are usually ignored.
Dang tax and spend South Dakota republicans.
Note the literature review, also.
https://www.lrrb.org/pdf/201432.pdf
Notice the hockey stick curves – then tax them to oblivian.
https://www.fhwa.dot.gov/reports/tswstudy/TSWwp3.pdf
As I wrote, it is settled science and math. It’s only a made-up issue in the minds of lobbyists those who take their fodder.
Kinda interesting that 2 of the ‘nay’ votes were from Dennert and Goodwin – just remaining consistent in opposing tax increases? Which begs a question – a tax increase such as this requires two-thirds in each house, correct?
Cory, great post!
This new tax is all about marginalizing the civilian benefits of cleaner energy, in South Dakota, on purpose, with such a small offset in tax revenue that it’s basically just a ‘sin tax.’ It is intended to drive the liberals out/away from South Dakota. That’s all.
Edwin, I didn’t dismiss it out of hand. I listened to the arguments in committee, heard McCaulley do a far better job of presenting a rational philosophical and policy case than any of the proponents, and blogged accordingly. Rep. Duvall dismissed McCaulley’s objections out of hand, without any rational or specific rebuttal.
Workable? I agree, having someone check the odometer creates a new complication. In return, we dial back the cost of gasoline 28 cents per gallon and get a fairer tax system that more directly reflects the literal impact of each car on the road. Dealers already record odometer miles, so it’s not like the data is unobtainable. Some folks looking for alternative tax systems propose in-car tracking systems. Rather than new, costly, hackable tech in each car, we have odometer check-ins, where a county officer simply visually verifies your miles.
It sure feels like I’m using my head. I’m not trying to get electric cars out of paying a tax. I’m also not operating from any Republican knee-jerk impulse to punish greenie liberals (because if you’re driving a Prius, that’s what you must be, right?). I offering an alternative tax system that assesses real burden for road maintenance far better than Duvall’s flawed flat-tax-per-vehicle and even better than the current tax.
Let’s keep our taxes in silos., Leslie and Robert. Let the road tax imposed on drivers and their vehicles be strictly for addressing road damage. If we need a carbon tax to cover environmental damage, impose that at the refinery or generation plant.
John, those tables! Hubba hubba!
According to John’s first link, from MNDOT, one garbage truck has the road-damage impact of 1,279 passenger cars. One long-haul semi-trailer has the impact of 1,408 cars. Stunning.
Looks like I’ll need to scale my ton-mile tax even higher at the heavy end.
Cory, for the average driver the ridiculous road damage assessment by big trucks of Johns tables is no surprise. Overloaded trucks are even worse. I estimate that 10 to 20 percent of the trucks that go by my house are overloaded. How can I tell?? That is the percentage that shake my house and crack my wall’s!
I’ve been privately seething over our current truck everything society for a long time. We have gone to a system of agriculture that requires that the grain produce of the land all be hauled to a grain elevator, processed and hauled back out to a CAFO. That is currently considered efficient as opposed to producing the end product on smaller farms as we once did. Similarly the fertilizer gets hauled as well when a large part of that used to come from the animals on the farm.
Just a small bit of things that seem to have gone wrong in this country today.
Thanks for allowing me to rant!
Holy smokes Cory, I thought you were talking about checking the miles on just the electric vehicles; but every vehicle in
the county? Would the county officer go to every residence and farm to do this? Or would people have to drive every
gas powered vehicle on their property to the county seat? Maybe you should ask some county commissioners how they
would accomplish this task. Maybe people would self certify. How well do you think that would work? Another thing–
there are a fair number of older gas powered vehicles that no longer have a working odometer, have not worked for the
last five to ten years. How about miles driven in other states? And then if gas in SD is .28 cheaper, how many people
from surrounding states would be coming to SD to buy their gas? And then those states would not be collecting tax
with which repair their roads. How much additional bureaucracy do you envision?
I don’t think you can seriously say that all 17 states charging a fee on electric vehicles have jumped off a cliff.
One would suppose that some of those states had intelligent people looking at this situation and the best they
could come with at this time was the fee. Possibly there will be a better solution as time goes. This is
likely going to be an evolutionary process, feeling our way, so to speak.
I don’t know how well electric vehicles will catch on in the northern tier of states. In SD, it is my thought that they
may work pretty well in Sioux Falls and Rapid City. It is my understanding that if you have to use the heater
the range is cut substantially. The technology will likely improve.
Cory, I follow your blog because I find it quite interesting at times.
I just don’t think you’ve thought this through.
Cory,
The tax may be imposed on the refinery or the power plant or the wind farm, but they will just pass it along to the consumer in one form or another.
The other issue with carbon tax is where does the money go? Does it go into the general fund when other revenues decrease? Or does it help solve the problem?
Hugh Bartels said today that Oregon taxes electric vehicles. Looking online – only finding that they subsidize electric vehicles. Black eye for SD to be so backwards…
Conservatives are allowed to have tax loopholes in South Dakota, but the moment anyone spots one that a liberal might be using, close that damn thing up right away!
Have you heard? We live in the land of double standards.
The subsidies are a tax of sorts….but they just are not being applied to the electric car driver.
The true expansion of electric/hybrid car ownership will occur when the prices come down and the value to the consumer goes up. In the northern states that may mean being able to go around in the snow and the cold without range anxiety.
https://www.greencarreports.com/news/1113798_who-will-sell-the-first-affordable-awd-electric-suv-poll-results
I thought about a law bill that would red flag every tree hugger driving a Prius or a Bug and warn the world they are dangerously in the vicinity. Beeping noises when moving forward perhaps. Make them wear pink beanies and gloves with a fringe. I wasn’t sure what.
Then Mr. H pointed out his bicycle would cost him a few bucks no matter how fat he is. It made me think. What if we mandated tracking devices be permanently affixed to all bikes and we tracked them and paid them for the miles they rack up that are not going on cars? The state could run a website that’s woukd be free to do since they already have a website and the public could track them too.
When tax loopholes encourage technology innovation, they can have a positive influence on the economy and society. However, when South Dakota conservatives prematurely close incentives like this (before it can do any significant good), it’s just an attack on liberals and an effort to repel them from living in South Dakota.
That’s all that’s going on here.
Subsidies encourage companies to build electric cars, but not necessarily better electric cars.
Encouraging innovation would mean something like if you can show that the range of your electric car exceeds 250 miles in winter, your car gets a subsidy.
Choosing not to taxing electric car miles is more of loophole or an incentive for consumers to purchase those vehicles – which allows for greater private R&D on the technology.
Subsidies are handed out for things like Exxon-Mobile to explore the Earth for more sources of oil.
My feeling is that you can escape any tax on a vehicle or gas by not having or driving a car. That’s difficult in rural areas, I realize, but pretty easy in town. Towns should begin to plan development for easy pedestrian/bike access, and not put big office buildings on the edge of the city where they are inaccessible.
Living within walking or biking distances to a job makes it easier to not pay gas or other similar taxes. My brother bikes to work, even in winter. His preferred route is via the Sioux Falls bike trail. If it is too snowy or icy, he has to take his vehicle. I had to have my vehicle for work, but now that I’m retired, at least for the moment, I don’t drive much and gas up about once a month, saving lots of money and not paying taxes. I’d like to get that down to zero and get rid of the car, but I do like to hit Ice Age Trail and other hiking areas on the edge of the city. A few years ago we moved in from the fringe of the city to a more central location, so it is possible for us to shop for necessities without a car. We often use the car, though, if we are out anyway.
I don’t have an opinion about this tax. We have some sort of charge in Wisconsin, thanks to our tax and spend Republicans, who, of course, never think of increasing the income tax on the upper brackets to pay for necessities. Right now electric cars are driven mostly by the wealthy or upper middle class. They can afford any charge.
The only incentive I see at the moment is that if the consumer wants certain things out of an electric car and a company can deliver on those items, they will sell more electric cars.
Those electric cars will still use the roads, so if everybody drives an electric car, where will the road funds come from?
Just because subsidies are given to Exxon-Mobil doesn’t mean we should follow that example. While the Exxon-Mobil subsidies encourage more exploration and extraction, they have nothing to do with more efficient use of the oil.
What we have to be careful of is the wealthy/upper middle classes being able to avoid any carbon taxes by purchasing electric vehicles or recharging them off-the grid at home, and the lower/middle classes paying them by continuing to drive the more affordable gasoline-powered vehicles.
I don’t know how many vehicles there are in South Dakota, but let’s say we subsidize 400,000 electric vehicles one day at $7,000 per vehicle. That is 2.8 billion dollars….or about 60% of the state budget for FY2018, or not quite twice the money we get from the federal government today.
So long-term I do not think full subsidies are the best way to go, given what that money could be spent on instead.
Someday there might be 400,000 electric vehicles in South Dakota, I doubt it will be in my lifetime, and the day South Dakota gives citizens $7000 for every electric vehicle they own will be the day they carve another face on Mount Rushmore.
Cory, your odometer-based tax assessment fails to capture the revenue we’d lose from the gas tax from out-of-state vehicles using our roads. Especially when you think about the trucks that zoom through out states and the damage they do, a direct tax on fuel used is the only workable way to capture some revenue for the impact they have.
South Dakota’s highways carry more than just South Dakotans. It’s fair for those guests who enjoy our roads to contribute toward their maintenance.
If the recharging infrastructure were configured like gas stations, then one could capture road taxes that way too. Pull up to the energy station and either swap out a battery or enjoy fast recharging, with a similar tax collected upon payment.
Well that $500 is not going to pave much highway.
By getting rid of this tax ‘exemption’ for electric cars, we repel owners of those cars from living in South Dakota, and the approx. $500 of tax revenue generated, by doing so, can pay one construction worker for a few days.
Conserva-thinkers think it’s an even trade.
We don’t want any more people moving to South Dakota, anyways. Right everyone?
I think there are enough people in South Dakota, Mr. Adam. Too many, probably. New rules saying everybody who moves here has to have a chip implanted and live in Minnehaha or Lincoln counties for 15 years might be in order.
It’s extremely poor attitudes, like the above, which keep economic policy in 4th grade out here.
“If we developed a diverse educated economy, people would want to move to South Dakota and that would ruin who we are.”
Rural conservatives tend to be anti-economic growth because of their aversion to people who are different than them. Thanks for helping me make that extra clear, Grudz.
Sad.
My pleasure, Mr. Adam. Please help spread the word.
Wayne, back in the early 70’s, I worked for Hy-Vee warehouse in Cherokee, iowa. Hy-Vee had several stores in S Minnesota at that time and to ensure Hy-Vee’s trucks paid their share of road taxes, they had to come in-state with short fuel and fill-up at Minnesota pumps.
Like any other business, truckers will just pass the tax cost along to the consumer through higher freight costs. Wonder what food would cost if farmers were allowed to pass along increases in seed and fertilizer and equipment?
https://www.vox.com/energy-and-environment/2018/2/27/17052488/electricity-demand-utilities
Electricity demand is flat and utilities are freaking out.
Energy prices in Germany haven’t flattened out despite preferences for wind/solar. Semi-good news, CO2 emissions are flat and lower than 1990 levels, but they are not reaching their targets.
https://www.bloomberg.com/news/articles/2018-02-26/germany-s-runaway-power-pollution-bills-haunt-merkel-s-new-term
So cities may ban diesel cars to reduce CO2. However, they will need more electricity given their desire to replace diesel cars with electric ones.