As technology, policy and politics change the transportation landscape in Georgia, the state will have to reconsider how it funds transportation infrastructure in the future.
One of the most exciting technological advances is in electric vehicle battery manufacturing. As electric vehicles become more efficient and popular, it will challenge the state’s reliance on per-gallon fuel taxes.
Policymakers must investigate alternatives to fuel taxes for funding Georgia roadways. A transition from per-gallon taxes to per-mile charges will be necessary over the next several decades.
The world of transportation is being altered by three sweeping changes: technology, policy, and politics. As these three transform the transportation landscape in Georgia, the state will have to reconsider how it funds transportation infrastructure going forward.
One important technology is electric propulsion. Recent media reports discussed the siting of SK Innovation’s new electric-vehicle (EV) battery manufacturing facility near Commerce, which will make Georgia one of the world’s largest hubs of EV battery manufacturing and “will account for nearly half of our nation’s vitally needed non-captive EV batteries,” Georgia Gov. Brian Kemp announced in March 2021.
The massive hub is expected to draw more EV-related industries to Georgia. Along with a “green” policy push toward EVs from the Biden administration, it is likely to fuel a growing interest in electric vehicle use on Georgia roads and highways.
One challenge this presents is that roads in Georgia and across the nation are largely funded by per-gallon fuel taxes. As technology produces more fuel-efficient vehicles and non-petroleum-fueled vehicles (such as EVs), this reduces the fuel tax revenue that policymakers depend on to pay for roads, bridges, and supporting technology such as electronic toll collection.
The revenue reduction is starting to take place despite increases in vehicle-miles traveled (VMT), population, and the costs of surface transportation infrastructure. Therefore, policymakers must investigate alternatives to fuel taxes for funding Georgia roadways.
The Fuel Tax’s Long History
The mass-market Ford Model T, the first vehicle affordable to the middle class, began production in 1908. Between 1913 and 1927, Ford produced one million of the vehicles, selling them at $850 each. In 1919, Oregon—with 103,418 registered automobiles and trucks on its roads by 1920—became the first state to impose a (one cent per gallon) gasoline tax “for the repair of the damage done to said highways by such vehicles, machines and engines traveling thereon.” By 1925, 35 states were using such a tax; by 1932 all states and the District of Columbia had a gas tax, levied at rates ranging from two cents to seven cents per gallon.
The federal government entered the fuel tax arena in 1932, enacting a one cent per gallon gas tax to help cope with federal funding shortfalls during the Depression. It was not until the Federal Aid Highway Act of 1956, which launched the Interstate Highway System, that the federal gas tax was dedicated to highways (like most state gas taxes). That law also created the federal Highway Trust Fund to safeguard these dedicated fuel tax revenues.
When the Interstate system was nearing completion in the 1970s, instead of repealing or reducing federal fuel taxes, Congress increased the tax rates and expanded the uses of this revenue: first to many other kinds of highways, later to include mass transit, and eventually even sidewalks and bike trails. The federal gas tax was last increased (to 18.4 cents/gallon) in 1993 and has remained at that level ever since. Because Congress has preferred to spend far more than its gas tax brings in, it has regularly “bailed out” the Highway Trust Fund with general fund monies, totaling $157 billion as of 2021.
Current federal policies focus increasingly on eliminating fossil-fuel use, including petroleum-fueled vehicles. As a result, fuel taxes as the primary highway funding source are endangered. Even if increased, they are highly unlikely to provide the revenue necessary for this nation’s future transportation infrastructure needs.
In March 2021 the White House announced President Biden’s $2 trillion “infrastructure” program, including $174 billion for electric vehicle subsidies and technology. And in a May 2021 speech at the Ford Rouge Electric Vehicle Center in Dearborn, Mich., the president reinforced his commitment to EVs: “Look, the future of the auto industry is electric. There’s no turning back.” He added, “Right now, 80 percent of the manufacturing capacity of those batteries is done in China. … We went down to Georgia and took care of that.” His reference was to the SK Innovations battery plant. Biden promised to “set a new pace for electric vehicles.”
But even before this renewed focus on EVs, the diminishing returns on fuel taxes were growing obvious. It’s not for a lack of cars. It’s the increasing fuel efficiency of the fleet. The federal government first enacted Corporate Average Fuel Economy (CAFE) standards in 1975, after the Arab oil embargo. The regulations, aimed at improving fuel economy of cars and light trucks (pickup trucks, vans, and SUVs) produced for sale in the United States, have grown increasingly stringent.
For the 1975 model year, according to data from the federal Environmental Protection Agency, about 10.2 million vehicles were produced with “real-world” average fuel economy of 13.1 miles per gallon (mpg). Real-world means actual highway driving conditions. For model year 2019 (latest data available), 16.1 million vehicles were produced, with average fuel economy at 24.9 mpg. While 2020 model production numbers were not available, the average fuel economy was 25.7 mpg. In other words, while annual vehicle production for 2019 was almost 58% higher than for 1975, the average mpg was a whopping 90% higher in 2019 than in 1975.