Electric vehicle sales continue to increase each year, which is leading to less fuel tax revenue for Oklahoma. To preserve infrastructure funding, officials are looking at alternative taxes for EV owners. Journal Record editor Russell Ray discusses why fuel tax revenue is important to the state and what an EV tax could look like.
Drew Hutchinson: You’re listening to the Business Intelligence Report, a weekly conversation about business news in Oklahoma. I’m Drew Hutchinson. Joining me is Russell Ray, editor of The Journal Record. This week, we’re doing a little forecasting and discussing how increased sales and usage of electric vehicles impacts a key state and federal revenue source. According to a study from April, electric vehicles composed 1.8 percent of car sales nationwide. That may not seem like much, but that’s still around 1.2 million electric vehicles on the road in the United States, and sales are growing rapidly year to year. But as Journal Record reporter Steve Metzer wrote in a story last week, as the electric vehicle industry expands, Oklahoma isn’t getting as much fuel tax revenue. Russell, why is this significant?
Russell Ray: Fuel tax revenues are in decline and state and federal officials expect the decline will continue. It’s a very concerning issue because these revenues are a vital source of funding for the maintenance and repair of roads, bridges and highways in the state. Right now, motorists who drive electric vehicles don’t pay any form of fuel tax. And as the cost of electric vehicles comes down and as the infrastructure for EVs improves, more drivers are expected to make the switch to EVs.
Hutchinson: There aren’t enough electric vehicles, or EVs, on the road right now to cause a drastic fuel tax revenue decrease in the short term. But officials are aware that manufacturers are investing more and more money into EV technology, and they know a day will probably come where an alternative tax is going to have to be levied to maintain infrastructure funding. It’s just a matter of how quickly.
Ray: That’s right. Officials say this is an inevitable trend that will force them to seriously consider replacing the fuel tax at some point in the future. All the major car manufacturers are beefing up their fleets of EVs and hybrids. Bobby Stem is the executive director of the Association of Oklahoma General Contractors. He said there’s no question that alternatives to the motor fuel tax need to be explored in Oklahoma. Some options being studied include registration assessments on EVs, new taxes on tires, and a tax for miles traveled.
Hutchinson: Oklahoma lawmakers have talked about this issue previously. In 2017, members of the legislature passed a bill that charged electric vehicle owners $100 annually and hybrid vehicle owners $30 annually. But the state Supreme Court later struck it down, saying that the law violated provisions related to revenue raising.
Ray: That’s right. Oklahoma’s Transportation Secretary Tim Gatz says the solution will probably involve a combination of different things. Some states are looking at registration fees for electric vehicles. Some of these options are also being discussed at the federal level. Gatz said a longer-term solution may be found in technology contained in the vehicle that actually tracks road use.
Hutchinson: But for now, Oklahomans shouldn’t expect a fuel tax to go away anytime soon.
Ray: That’s correct. This isn’t something that’s going to happen overnight. Before motorists ditch the internal combustion engine, a lot of work still needs to be done to build more infrastructure. Gatz said mass use of EVs is coming, but it’s an industry that is going to evolve very slowly.
Hutchinson: Russell Ray is editor of The Journal Record. Thank you so much for your time today, Russell.
Ray: My pleasure Drew, thank you.
Hutchinson: KGOU and The Journal Record collaborate each week on the Business Intelligence Report. You can follow us both on social media. We're on Facebook, Instagram and Twitter: @journalrecord and @KGOUnews. You'll find links to the stories we discussed during this episode at JournalRecord.com. And this conversation, along with previous episodes of the Business Intelligence Report, are available on our website, KGOU.org. While you're there, you can check out other features and podcasts produced by KGOU and our StateImpact reporting team. For KGOU and the Business Intelligence Report, I'm Drew Hutchinson.
The Business Intelligence Report is a collaborative news project between KGOU and The Journal Record.
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