Electric car owners don't pay gas taxes. Arizona leaders want to close that gap in road funding

By Howard Fischer/Capitol Media Services
Published: Monday, June 26, 2023 - 7:38am
Updated: Monday, June 26, 2023 - 10:14am

Kia EV6 at an Electrify America charging station
Tim Agne/KJZZ
A Kia EV6 charges at an Electrify America charging station in Phoenix.

Gov. Katie Hobbs wants state lawmakers to enact new laws to ensure that the drivers of electric vehicles pay their fair share of road construction and maintenance.

But the governor said she doesn’t have anything specific in mind — at least not yet.

The willingness of Hobbs to take on the issue could provide some impetus for efforts that go back nearly a decade to equalize the levies paid by motorists whose fuel comes from a charger with those who pay the state every time they fill up with the 18-cent-a-gallon tax on gasoline.

That issue, however, has evaded solution amid arguments ranging from personal privacy to who should bear the costs as what people drive shifts.

Still, changing trends will put pressure on lawmakers to resolve it.

The latest figures from the state Motor Vehicle Division show that the number of all-electric vehicles registered in the state ballooned from fewer than 35,000 in 2020 to more than 58,000 last year. And none of those owners, who are using state roads, pays a penny toward the $538 million generated last year in gasoline taxes, much of that earmarked for road construction and maintenance.

“We are working on fair solutions,” the governor said when asked about the issue at a press event this past week touting “green energy” in Arizona.

“I recognize this is a huge issue as we look at depletion of highway funds and to make sure that everyone who uses the highways are paying their fair share,” she continued. “And electric vehicles are a part of that.”

Hobbs acknowledged, though, this isn’t a simple fix.

“Given the Legislature, that is challenging,” she said.

But this isn’t a partisan issue.

In fact, it is a dispute between two Republican lawmakers that has resulted in the current stalemate.

And it has been Republicans, who control both the House and Senate — and, until this year, the governor’s office — who have been unable for years to come up with a solution.

They have had some success.

It was Rep. Noel Campbell, a Prescott Republican, who spearheaded efforts that resulted in repeal of laws that set annual registration fees for alternative fuel and electric cars at a rate just a fraction of what a similarly priced gas-fueled vehicle would require. Now the owners of cars and trucks pay fees on the same basis: the cost of the new vehicle.

But finding a levy for the lack of fuel taxes by these vehicles — many of which actually are far heavier than their fossil-fueled cousins — has so far proven elusive.

Bob Worsley, then a senator from Mesa, trotted out an idea in 2016 for a “vehicle mileage tax.”

Dave Williams, a vice president of Knight Transportation, noted at the time that this wouldn’t involve cutting-edge technology. He said the trucking industry already uses global positioning to track their vehicles.

The idea, however, failed to gel.

Some of it was whether it is foolproof. Williams said it’s possible to cheat using a GPS jammer.

“So, they could leave the house and drive for four hours and come back to the house, and nobody knows they ever left,” he explained.

But Williams said, technology aside, he questioned whether members of the public would be OK being tracked like truck drivers.

That hurdle remains today to the dismay of Rep. David Cook (R-Globe), who chairs the House Committee on Transportation and Infrastructure.

“We all pay at the pump for the Highway User Revenue Fund,” he said, the special account into which all gasoline taxes flow. But that “all” doesn’t include those drivers of everything from high-end Teslas and Lucids to all-electric Ford F 150s, the Chevy Bolt and the Nissan Leaf.

“Well, they don’t go to the pump,” said Cook. And that, he said, leaves one option being a mileage fee.

None of that, said Cook, is complicated — or intrusive.

“On my new Ford pickup, I have an app,” he explained. “That app tells me everywhere I’ve gone, it tells me the mileage on the truck, it tells me when to service it.”

But Cook and supporters of a mileage tax have run headlong into the Arizona Freedom Caucus.

Sen. Jake Hoffman (R-Queen Creek), its chairman, crafted legislation that would have made it illegal for any level of government to not only track someone’s movements through things like traffic cameras or license plate readers but also through any other data from private sources.

And for good measure, his SB 1312 included a specific bar against imposing or collecting any mileage fee or tax, a per-mile charge or anything else based on the miles driven by anyone.

Hoffman said such restrictions on government are justified.

“One thing we know for certain is that taxing and tracking people’s movements is a significant infringement on Arizonans’ freedom of mobility, something we can all agree is a highly undesirable and anti-freedom outcome,” he said.

Hoffman’s bill cleared the Senate but died in the House when Cook would not provide the required 31st vote.

Cook said one alternative proposed by foes of a vehicle-mile fee that would help capture lost revenues would be a tax on electricity. That, he said, is not an option.

“So now everybody gets a tax on electricity to pay for electric cars, even if you don’t have one,” Cook said. “It’s not well thought out.”

He said, though, there are options to get what he thinks would be appropriate, all without tracking the comings and goings of individual motorists.

One, said Cook, parallels the fact that drivers of most gasoline-fueled cars and trucks need to take them in, at least on a biennial basis, for an emissions test. He said owners of electric vehicles could be required to bring them in to a state-operated facility where what’s on the odometer could be recorded, with a fee assessed based on the miles driven since the last time.

And if that’s too intrusive, Cook said the state could compute what is the average number of miles driven in Arizona, what that would have generated in fuel taxes in a regular car, and then levy a fee that, like the gasoline taxes, would go into the Highway User Revenue Fund.

“There’s several options,” he said, with the bottom line being “how do we get them to pay their fair share.”

Hoffman, however, said all those ideas are based on what he said is the flawed assumption that roads and highways should be built and maintained only with fuel taxes and the like.

It starts with the fact that vehicles are becoming more efficient, needing less fuel for every mile traveled. And then there’s the fact that the state’s 18-cent-a-gallon gasoline tax has not been hiked since 1991.

So what’s needed, Hoffman said, is an entirely different paradigm.

“Building and maintaining roads is a foundational responsibility of government,” he said.

“The simplest and most responsible way to ensure this happens in the least financially oppressive manner possible is for the gas tax to be completely eliminated through innovation and higher efficiency vehicles,” Hoffman said. And that would require governments “to properly reprioritize this important public asset in their baseline expenditures.”

But Hoffman offered no suggestions of what other current spending might be cut given the opposition of the Free Enterprise Club to virtually any tax increase.

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