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Report: Growing Electric Vehicle Ownership Craters Gas Tax Revenues

Chris White on August 16, 2017

Gas tax revenue is expected to plummet in the U.S. during the next decade if electric vehicle sales take up more than half of all new car sales, according to a report published Wednesday.

Even conservative forecasts of electric vehicles adoption will dramatically affect gas tax revenues in places like California and in other states with a high concentrate of Teslas, a research note from Citi points out.

“If electric vehicles represent 60% of new car sales by 2030, annual tax revenue in 2030 (federal and state combined) could be reduced by $10 [billion], or ~14%, versus a scenario where EV sales stay flat at 1%,” the note states.

Revenue could dip by as much as $3 billion if electric vehicles like Tesla’s Model 3 take up 20 percent of overall sales, according to Citi, the financial research arm of Citibank.

The report could affect states with a high number of electric vehicles, such as California, which recently passed the country’s largest gas tax.

California’s new gas tax is leap-frogging Pennsylvania, at $0.50 per gallon, with New York at $0.42 following closely behind. The Golden State’s gas tax would increase from $0.40 to $0.52.

Gas taxes are supposed to provide revenue for road construction, maintenance, repair, and improvements, but states typically divert much of the money to other sources. In 2013, for instance, gas taxes and motor vehicle license fees paid for 40 percent of state and local road spending.

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