Electric Vehicles, Motor Fuel Taxes, and Road Funding in the Seventh District and Beyond

14 Pages Posted: 16 Aug 2023

See all articles by Emma LaGuardia

Emma LaGuardia

Federal Reserve Bank of Chicago

Kristin Dziczek

Independent

Rick Mattoon

Federal Reserve Bank of Chicago

Date Written: August 16, 2023

Abstract

State and federal highways are currently funded by a combination of motor fuel taxes (MFTs), general fund transfers, fees, tolls, property taxes, and bond revenues. The MFT share of funding is declining due to increasing overall fuel economy trends, inflation, and recent vehicle miles traveled (VMT) trends—especially during the 2020–21 pandemic years which saw lower passenger and freight travel. Electric vehicles (EVs) have the potential not only to accelerate the fuel efficiency of vehicles in use, but also to lead to a sizable population of individual road users who pay no fuel taxes. A recent study estimated that EVs reduce gas tax revenues by $250 million a year. So how will states pay to fix the roads?

Keywords: Motor fuel taxes; Road user charge; Infrastructure; Road maintenance; Electric vehicles; Internal combustion vehicle; Vehicle taxes;

JEL Classification: H00, H2, H22, H23, H27, H54, H71, R42

Suggested Citation

LaGuardia, Emma and Dziczek, Kristin and Mattoon, Rick, Electric Vehicles, Motor Fuel Taxes, and Road Funding in the Seventh District and Beyond (August 16, 2023). Economic Perspectives, No. 2, 2023, Available at SSRN: https://ssrn.com/abstract=4541404

Emma LaGuardia

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Rick Mattoon

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States
312-322-2428 (Phone)

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