I’ve had the question asked several times recently about what happens to the fuel tax as the marketplace transitions to electrified commercial vehicles EVs.
As you know, a significant portion of the price of both gasoline and diesel fuel is comprised of taxes that are levied at both the federal and state levels. With the advent of EVs, this source of revenue for federal and state governments goes away under the current rules.
The average tax per gallon of diesel fuel purchased today at the pump in the U.S. is about 65 cents/gallon. Of that, 24.4 cents goes to the federal government to add to the Highway Trust Fund. The rest goes to states in various forms. Depending on the current price of diesel, taxes make up about 15% to 20% of the total price you pay for a gallon of fuel. With an EV, there is no corresponding tariff or excise tax on the electricity that you use to charge the vehicle. Therefore, as the percentage of EVs in the total vehicle population increases, the revenue for making road repairs and improvements at both the federal and state level will go down.
It is also important to note that the federal fuel tax rate has not been increased since 1993, and the average fuel economy for all vehicles on the road has improved significantly during that time. If the federal diesel fuel tax rate had been indexed for inflation since 1993, the rate would now be about 44 cents/gallon – about 20 cents more per gallon and almost twice what it receives today.
The solvency and adequacy of the Highway Trust Fund has been discussed frequently over the last few years. In fact, Congress has added funds from general revenues to the Highway Trust Fund periodically since about 2005 to keep it solvent. The most recent example of that is the Infrastructure and Jobs Act that added about $100 billion as part of the legislation, but also authorized increased spending for projects. This will keep the fund solvent until 2027 as shown in the chart below from the Committee for Responsible Federal Budget.
