Tax the Prius, Feed the Tahoe?

For a few years, an Oregon program (unintentionally) charged drivers of “green” cars and handed over cash to drivers of gas guzzlers. Not what one would expect from a state which in the 1980s cancelled a freeway and used the money to build a light-rail line.

Road User Charge (RUC) is a new acronym you can add to your transportation vocabulary. It’s a new way to pay state gas taxes, which is being tested out as states figure out how to impose road taxes on those pesky electric vehicles which avoid the gas station — and in so doing, avoid paying fuel excise taxes on gasoline.

RUCs involve plugging a meter into your car’s diagnostic port (OBD-II) to collect annual mileage, which states use to bill you for the miles you drive (1.8 cents/mile in Oregon). This would be in lieu of the gasoline tax.

Collecting taxes in this manner feels invasive to some. The alternatives may be less intrusive, but they are also less fair. Illinois considered raising the annual DMV fee for EVs to $1000 a year — roughly the gas tax a typical driver would avoid after rolling 5-thousand miles. The charge fails to differentiate between a hobbyist who only drives a few miles on the weekend — and a road warrior who gallops their Tesla on a 200 mile per day commute. (Ultimately, Illinois backed off on their $1,000 idea — for now.)

Oregon’s system is still a pilot program, and this week they a round of fixes. For instance, the accidental subsidy of inefficient SUVs:

Scenario: I drive my old Hummer H1 around 15,000 miles a year. The 10 mile-per-gallon engine burns up enough gasoline that I spend over $16-hundred dollars in gas taxes each year. But under OReGO (the brand name for Oregon’s Road Usage Charge pilot program), I’m charged just $270 (at the going rate of 0.18 cents per mile). As the original program did not allow for double taxation, I could submit my gas receipts and the state would refund the difference ($1,330 cash back to me).

The gravy train has ended, my Suburban and Escalade driving pals. Starting next year, Oregon will no longer refund any fuel taxes beyond the RUC.

Oregon likely had an opposite problem with plug-in hybrids and electrics (the very cars they do want in the pilot program). Why volunteer to pay $270/year, when the current fuel tax system charges $0? By 2022, Oregon will begin billing EV drivers an $158 per year registration fee at the DMV.

This all sounds confusing. If you feel a bit stressed out, take comfort knowing policy makers are probably stressed out, too. The fuel excise tax has worked well for nearly a century. It was not the bureaucrat, but us the consumer (with our environmentally-friendly cars), who shook the tree branch and snapped it.

Know very well how slowly policy changes, there is wisdom in states beginning their RUC pilot programs now. How most of us pay our road taxes will likely change gradually over decades, and certainly not overnight.