The use of electric and hybrid cars has been encouraged by both the state and the federal governments for years now. In fact, several of the states have come up with their own levels of tax credits to boost the number of users of these innovative transportation. However, a loophole has started to surface amid the goal to foster the use of zero-emission vehicles. People of the higher class can now get away without paying the gas tax. Such dilemma is now becoming the focus of several groups and the subject of political debate. Where does the problem stem from. Read on as the rest of article sheds light on what is now seem to be an electric slide.
The Beginning of the Backlash
The vehicular boom that is yet to transpire involving electric and hybrid cars is now facing a turmoil that may likely be felt from the consumers’ end. Supporters of the Electric Vehicles (EV’s) continue to argue that the development of battery technology will enable people and the nation to drastically reduce their dependence of oil and fossil fuels. On the hand, critics also condemn the loans provided by the Department of Energy to several car manufacturing companies. In addition, a number of state legislatures have passed different laws aiming at Tesla. These laws likewise prohibit the Elon Musk-owned and managed car manufacturing company Tesla from selling their electric cars directly to individual consumers. The enforcement of the law would compel Tesla to work acknowledge the local dealers.
The End of Tax Credits and the Beginning of New Fees
There is no denying that the latest legislature passed in Georgia last April 2nd would result in a bigger backlash in the realm of electric and hybrid cars. The recent bill in the said state calls for the end of the massive $5000 tax credits for the electric vehicles. Such tax incentive was known to be one of the most generous in the entire U.S. With the federal state giving a tax credit of as much as $7,500 , the electric car buyers prior to this April 2 legislation had been awarded with a whopping $12,500 tax incentive. However, the wheel has turned for the owners of the electric and hybrid cars in Georgia. With the new legislation comes with with a registration fee of $200 for people who already own these electric vehicles.
Will Other States Follow Suit?
The answer of this question is – yes, most likely. In fact, Georgia is not the only state to pass a Legislature that prompts owners of electric and hybrid cars to pay. For instance, Washington has already started to implement the policy that requires owners of these cars to pay an annual tax amounting to $100. This policy has been enforced since 2013. Moreover, Virginia has also implemented similar policy that requires owners of hybrid cars to pay $64 on annual tax. With the different states devising their own policy and limiting the tax credits, the long lasting impact is expected within the electric and hybrid cars communities.
Purpose and History of Tax System Modification
The modification on the tax system is also a sign that the use of electric and hybrid cars does not only influence the choice of consumers, but also impacts the way the state and the federal governments support such innovation. Will this tax revolution cease to continue? To some degree, the change in the tax system is brought about the necessity to constantly improve the roads people with electric cars drive on.
Imposing tax on the use of motor fuels has also been a practice in the country. The federal ta on gasoline and diesel are 18.4 cents and 24.4 cents in every gallon respectively. The said tax collection is managed by the Federal Highway Trust Fund. The collection gets distributed every year and is allocated on the maintenance and constructions of roads. Overall, the federal government collects billions of dollars in motor fuel taxes. The loophole in the tax system is seen on possibility of the electric and hybrid cars users to dodge taxes imposed on g and diesel. With the weak economy, there has been a huge decline on the miles driven by the US drivers since the onset of 2007.
Impact of Electric and Hybrid Cars Manufacturing
Moreover, the leap in the sales of the electric and hybrid cars has shown a significant and steady increase. At present, the plug in cars and the hybrid cars have been accounted for 3% of the sales every month. Moreover, the growing industry of electric vehicles are also shaping an entirely new dynamic for the basic cars. One example is the innovative use of alluminum and the modified designs on engines. This shift in car designs has been proven by a study conducted by the Transportation Research Institute of the University of Michigan which reveals that a car sold during the first quarter of 2015 has a 26% higher mileage per gallon as compared to the same car bought during the last quarter of 2007.
Another effect seen with the emergence of the electric and hybrid cars is the plummeting volume in gasoline sales. As per the Energy Information Administration, there is a 4% gap between the amount of gasoline utilized in the years 2014 and 2007. As a consequence, the tax collections are experiencing a significant slump. For instance, the taxes allocated for highway maintenance and spending in 2012 is $21.2 billion while in 2013, it was down to $19.4 B. With such new tax behavior, it is expected that state governments would devise new ways to keep up with the changes.
The Real Dilemma Unfolds
With the new and emerging tax behavior brought about by the innovation and presence of electric and hybrid cars, an entirely new dilemma unfolds. The roads are now shared by middle class car owners who are paying taxes with their gas usage and those who get to drive around with their ultra-expensive electric and hybrid cars who are not paying a single centavo on gas taxes. There are those who are driving with their regular cars and paying taxes every time they gas up. There are elites who are driving their almost $100K Tesla cars who are not paying a single penny. All of these cars , regardless of the type and cost, have equally the same wear-and-tear impact on the roads. The questions now are – do all these tax policies implemented by the different states make sense? Will the federal government also cease to provide tax incentives for the electric and hybrid cars?
It sure does make sense to come up with mechanisms to ensure that all users drivers and users of highway pay their dues and contribute to the unceasing road upkeep and constructions. However, these policies should all be made reasonable. For instance, owning a car should not be taxed at all. Furthermore, the policies should not overlook the growing number of hybrid car owners. The reason is simple – as per the site called Volt Stats, plug-in hybrid owners of the Volt drive in an all-electric mode. In short, owners of electric and hybrid cars should be equally taxed. In addition, the continuous innovation on improving car inefficiencies should also be factored in computing the taxes. If a car is considered hyper-efficient due to the great deal of mileage it has on a per gallon basis, should the owner be taxed more? How can new policies be made fair to the new and current owners of electric and hybrid cars?
It is certain that the new tax behavior proves that the system of the past cannot be always applied at present. With the constant flow and out pour of innovations this 21st century, it is essential for the current state and federal government to revise tax laws and implement new ones that are deemed more logical and just to all type of road users, not only based on the cars they drive, but also based on their capacity to pay taxes. Electric and hybrid cars users are now in the look as to which state will follow suit after Georgia.