Daniel Bunn President and CEO at Tax Foundation | Twitter Website
The debate over infrastructure funding has highlighted a pressing issue: the decline in highway revenues due to the rise of electric vehicles (EVs). Current proposals aim to address this shortfall by implementing fees on new EVs, but some argue for more comprehensive solutions.
The Highway Trust Fund faces significant fiscal challenges. "Highway Trust Fund (HTF) expenditures are growing more quickly than the HTF’s primary revenue sources—user fees in the form of taxes on gasoline and diesel fuels," the report states. The fund's deficit reached $13.5 billion in 2024 and could climb to nearly $37 billion by 2034.
The Fair SHARE Act, introduced by Rep. Dusty Johnson and Sen. Deb Fischer, proposes a one-time fee of $1,000 on new EV sales, along with a $550 fee on heavy battery modules. While this approach addresses part of the problem, it does not account for mileage driven by EV owners.
Estimates suggest that these fees could generate almost $50 billion over ten years but would reduce the federal deficit by only $36 billion after tax offsets. "Based on a series of estimates, we project the Fair SHARE Act would raise $48.75 billion over the next decade."
However, these projections come with uncertainty due to variables like policy changes and technological advancements in EVs. A Vehicle Miles Traveled (VMT) tax is seen as a more effective long-term solution for aligning road use with maintenance costs.
A VMT tax would charge drivers based on miles traveled, potentially raising $270 billion over ten years and reducing the federal deficit significantly if implemented at appropriate rates.
Despite concerns about administrative feasibility, successful state-level programs indicate that a federally coordinated VMT system could be viable. Such measures could provide a sustainable solution for highway funding amid evolving vehicle technologies.
