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OUR PERSPECTIVE

Our perspective: Gas tax needs another look

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As Gov. Tony Evers and the GOP-controlled state Legislature begin putting together their agendas for next year, we would urge them to put the state’s gasoline tax on both their lists.

The simple fact is that the revenue Wisconsin relies on to build roads and bridges is going to decline in the coming years. The increasing popularity of hybrid and electric vehicles has already begun to shrink those revenues and the situation will be compounded by federal standards dictating that new cars must get an average of 40 mpg by 2026.

Currently, Wisconsin’s gas tax stands at 30.9 cents per gallon where it has been since 2006, when the state stopped indexing for inflation. The federal government adds another 18.4 cents per gallon.

The state gas tax is estimated to bring in $1.046 billion to Wisconsin this fiscal year, which accounts for more than half of the Wisconsin Department of Transportation’s annual revenue of just under $2 billion. State Transportation Fund spending this year is estimated to be $2.3 billion.

But as electric and hybrid cars and trucks grow in popularity, the heavy reliance on the gas tax is expected to erode those revenues.

As the world warms and extreme weather events mount, governments and corporations have been called on to address climate change. The planet's temperature has already risen by about 1.1 degrees Celsius (2 degrees Fahrenheit) and the effects will only get worse with every additional tenth of a degree of warming, scientists warn. Scientists and officials agree that it's important to not make matters worse by burning even more fossil fuels — coal, oil and natural gas — that emit heat-trapping gases into the air. It's hoped that cleaner alternatives — such as solar and wind energy — will replace much of that demand. As costs of renewables plummet, more and more energy is being produced in sustainable ways, although the total amount of energy produced globally has also gone up. Newer technologies like green hydrogen, which uses renewable energy sources to make hydrogen to use for energy, and carbon capture, which sucks carbon dioxide out of the air, are being explored but still come with a heavy price tag and are untested on a large scale. Methane, a greenhouse gas that is about 25 times more effective at trapping heat than carbon dioxide but only lasts in the atmosphere for about a dozen years, will also have to be greatly reduced. Countries have vowed to plug methane leaks from oil wells and gas pipelines which would have immediate benefits for curbing warming, scientists say. Elizabeth Robinson, the Grantham Research Institute on Climate Change and the Environment's director, pointed to stopping deforestation and tweaking diets as solutions. Using land for agriculture, especially for livestock which also requires vast amounts of land for grazing, means forests need to be cleared and more greenhouse gases are emitted into the air. Robinson also pointed to use more what's termed 'active transport,' such as biking. "These are activities that can lead to reduce climate change and make us healthier at the same time," she said.

The burden is also facing the federal government. The Congressional Budget Office last year said if the gas tax remains at 18.4 cents per gallon and infrastructure spending increases at the rate of inflation, the federal Highway Trust Fund will come up short $140 billion in just nine years.

Wisconsin has already taken a small step to recognize the gas tax disparity created by electric and hybrid vehicles when it imposed an additional $75 per year license fee for hybrids and $100 for all-electric vehicles – on top of the $85 plate fee for gas vehicles.

But, so far, that has contributed fairly small amounts to the transportation revenues. Last year, the state netted $6.5 million in hybrid fees and electric-only fees raised $703,200, according to news reports. That’s not much of a dent in $2.3 billion in road spending needs.

While hybrid and electric vehicles currently account for less than 3% of vehicles statewide that looks like it may change rapidly. And, in fact, state estimates see a 16.6% rise in revenue from electric and hybrid vehicle fees this year.

Wisconsin isn’t the only state to face this issue of shrinking gas tax revenues. According to news reports, eight states this year considered legislation to modify existing programs or set up pilot programs to tax drivers of hybrid or plug-in electric vehicles based on the miles they drive. Some programs have the state install devices to measure miles driven, others rely on drivers to report their miles or track them through odometer readings when licenses are renewed. Utah set a mileage tax of a penny per mile in 2023, then 1.25 cents per mile and then indexing for inflation.

Back-of-the-envelope calculations tell us that if a Utah driver drives 14,263 miles per year, which is the national average according to the Federal Highway Administration, that would result in a miles-driven bill of $178 at the 1.25 cents per mile rate.

Miles-driven proposals for electric vehicles in Minnesota and Vermont failed to pass. Four states, Iowa, Kentucky, Oklahoma and Pennsylvania, are attempting to recover lost fuel tax revenues by taxing the electricity used at public charging stations.

Clearly, the gas tax landscape is changing.

We don’t know yet, what the best approach for Wisconsin should be, but the governor and the Legislature should be tracking closely what’s happening in other states and come up with a solution that’s fair for all drivers. That planning should happen now.

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