Andy Larsen: Are you ready to be taxed per mile you drive in Utah? Here’s who wins and who loses.

Utah Legislature taps into “road usage fees” to make up for shrinking gasoline taxes.

(Chris Samuels | The Salt Lake Tribune) Morning snow slows down traffic along I-215 in West Valley City, Friday, Dec. 10, 2021.

How should you have to pay to use roads?

At this point in time, it looks like the future is paying per mile you drive.

Right now, Utah is one of three states with an active program going where selected groups can pay ongoing road fees rather than a gas tax — a setup usually referred to as road usage charging. But at least 20 states are exploring the concept further, with small-scale pilot programs and studies underway.

But road usage charging is almost certainly going to change the taxes you pay — and there will be winners and losers in the new scheme. Where will you fit? Let’s dig in.

The current situation in Utah

Why are states considering road usage charging? Well, they’re scared to death about losing the revenue from gas taxes. The math here is simple: people are using less gas than before, thanks to rising efficiency in gas-fueled cars and rising sales of electric vehicles.

In 2021, 754,276,000 gallons of fuel were sold in Utah — that includes traditional gasoline, diesel, hybrid ethanol sales, and so forth. And on nearly all of those gallons, Utah now charges a 34.5 cent gas tax to help fund transportation infrastructure. That means roughly $600 million annually in revenue.

This year, the Legislature passed HB301, which amends the gas tax structure. In response to a huge year-over-year increase in the gas tax, it lowered the gas tax percentage rate calculation that gets us that 34.5 cent number. It used to be 16.5% of the average of the last three years of gasoline’s “rack rate,” now it’s 14.2%. But it also raises the “cap” that gas tax could be. Previously that cap was limited to 40 cents per gallon, and now it can rise to 42 cents by 2028. Frankly, I’d be stunned if we didn’t hit that cap, given where gas prices are already.

Also, legislators have decided to institute some programs in order to recoup money from electric vehicles. For one, HB301 instituted a 12% tax on charging stations’ electricity, for example — though that doesn’t impact home and business charging, where most EVs get their power.

Electric vehicle owners also have to pay an additional $130.25 registration fee per year, that seeks to recoup the lost revenue from gas taxes. (Gas-electric hybrid vehicles have to pay a $21.75 fee.)

But there is another option for EV owners: Utah’s road usage charging program. That program charges electric vehicles a flat rate of one-cent per mile driven rather than the annual fee. People can sign up at roadusagecharge.utah.gov, where they’ll put in information about their vehicle and create an online prepaid payment account. Then, the state’s chosen third party (emovis) will send an on-board diagnostic (OBD) device to the electric vehicle owner, which is plugged into the car and keeps track of miles driven. After miles are driven, the program automatically deducts the 1-cent-per-mile rate from the EV owner’s account.

If the EV covers 13,025 miles in a year, the owner hits the state’s annual cap — equal to the $130.25 yearly registration fee non-users of the program pay — and no further deductions are taken.

Breaking even today

So let’s do the math here. Who ends up paying more and who ends up paying less in this system?

Here’s a boring-as-it-gets scenario analysis.

Don’t you feel like an accountant now after looking at that graph? On the X-axis is the number of miles you drive per year. On the Y-axis is how much you’ll spend in taxes.

So for someone who drives 10,000 miles per year, the most expensive taxation option is owning a car that gets 20 miles per gallon — you’ll pay $173 in state taxes for gas. But the cheapest option is owning a traditional, non-hybrid car that gets 40 miles per gallon. That will cost $86.

EV owners are in between, regardless if they choose the yearly payment or the road usage charge program. There is no tax benefit here to owning an electric car over a gas-powered vehicle, so long as that car is fuel efficient.

But the average Utahn drives more than that, about 15,400 miles per year. (Now, I know what my data nerd readers are asking: what about the median Utah driver? You’re probably right to guess that the distribution of road usage is not balanced, because there are a lot of high-mileage drivers. But it turns out that there are a lot of low-mileage drivers, and in the evidence I’ve seen, median per-driver numbers have been slightly lower but not wildly lower than average numbers... probably about 5%-20% lower. So it’s probably reasonable to estimate the median driver is in the 12,000 mile to 15,000 mile range per year.) At those driving levels, electric vehicles are more cost-efficient, tax-wise.

Here’s the rub: the electric fees are currently slated to go up faster than the gas tax. State law says that in 2026, electric annual fees will increase to $180 per year. The rate usage charge program will then also rise to 1.25 cents per mile.

As you know, the gas tax is capped at 42 cents by 2028, eight cents more than it is now. Let’s say it rises by half that amount by 2026, to 38 cents. Here’s what our boring scenario analysis looks like under those conditions.

In 2023, the electric vehicles using the road usage charge program were paying about the same as a car that gets 35 miles per gallon. In 2026, the rising rates mean that electric vehicles pay about as much as a car that gets 30 miles per gallon. That means, by 2026, owning a electric vehicle will result in more taxes than gas vehicle ownership for a higher percentage of cars than it did in 2023.

Keep in mind, too, that cars are improving fuel efficiency year over year. The Biden administration set a target for new vehicles to average an advertised 49 miles per gallon by 2026, though real-world mpg levels are usually 20%-30% lower than advertised.

The current law includes one more bump — in 2032. Then, electric vehicles will be charged a $240 annual fee, and the road usage charge will rise to 1.5 cents per mile. I didn’t create an analysis graph for 2032, because I’m very uncertain about what gas taxes will look like then.

The future

Indeed, there may not be a gas tax at all by 2032. That’s because many states, including Utah, are weighing making the road usage charge mandatory for all vehicles.

The implementation details of that are sketchy, though — states are still weighing the particulars. In the summer of 2022, the group RUC America gathered state transportation officials, road usage charge advocates, and technology companies right here in Salt Lake City for a forum on the issue. You can even check out the slides used in all of their presentations.

One big question they discussed: what’s the best way to collect mileage data from all vehicles? Shipping an OBD mileage counter to every car user is possible, but difficult.

Utah is actually going one step further than that. This summer, the state started a pilot program with about 100 participants who use a GPS sensor that can tell the location of where they are driving, and even detect the lane of travel. The idea is that the state could charge different rates depending on which road was traveled — charging different rates in different cities, exempting out-of-state driving, and even adding on I-15 express lane charges all in one account.

Other possibilities discussed at the forum: a smartphone app where you take pictures of your odometer and send it in to the state; a periodic mileage allowance, where you purchase miles you can drive in advance, then use them; and working with vehicle manufacturers to learn miles driven directly from the car’s on-board computer.

The best idea, honestly, is for the odometer to simply be checked at every annual safety and emissions inspection — but Utah removed the annual safety inspection requirement in 2018.

All of these concepts (especially the GPS ones) raise significant privacy concerns. The gas tax wasn’t coupled with any individual’s driving habits, but road usage charging is.

There are also extremely reasonable concerns that the “level playing field” of road usage charging isn’t fair, either. For one, rural users are worried that they’ll get charged more than urban users because they typically drive longer distances. Studies show, though, that rural drivers do drive farther, but make fewer trips. So they actually end up paying less on average.

Perhaps my biggest problem with the proposed program is that a road usage charge scheme shifts the burden of taxation away from the heavy trucks that actually cause the vast majority of road damage. The average semi-truck does an estimated 2,500 times more damage to roads than the average passenger car — and semi-trucks make up about 10% of all vehicle miles traveled in the United States.

With gas taxes, heavier cars, trucks, and semis paid more for the roads than lighter cars, because they were simply less fuel efficient. Under the current road usage charge models being discussed, everyone would pay the same, regardless of how much damage their cars cause.

Overall, it’s clear that eroding gas taxes are going to force change to our taxation schemes. I just hope the average Utahn doesn’t get the short end of the stick.

Andy Larsen is a data columnist for The Salt Lake Tribune. You can reach him at alarsen@sltrib.com

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