The Motor Fuels Tax Dilemma: How to Fund Road Construction and Maintenance Without Tanking the EV and Hybrid Vehicle Market

Abstract

Since 2008, excise taxes on gasoline, diesel, and other motor fuels—motor fuels taxes (“MFTs”)—have failed to raise enough revenue to support the construction, maintenance, and repair of U.S. highways, bridges, and roads. This shortfall has been caused by a combination of stagnating MFT rates, inflation, increasing fuel efficiency in the nation’s automobiles, and, to a far lesser degree, increased usage of hybrid and electric vehicles (“EVs”), which use little or no motor fuel. Governments and legal scholars have introduced three proposals to remedy the shortfalls in MFTs that focus on requiring owners of EVs and hybrids to pay additional fees and taxes. This Article evaluates these three proposals and demonstrates that they are ineffective, impractical, and disincentivize drivers from purchasing electric and hybrid vehicles without raising enough revenue to justify this interference. When appropriate, the Article offers solutions to improve the proposals. Finally, it discusses two proposals to address the shortfall in MFT revenue as effective solutions that do not disincentivize EV and hybrid adoption: raising MFT rates and funding roadwork through general revenue.