Replacing Motor Fuel Tax Receipts

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Historically, motor fuel taxes have been a significant source of revenue, with most of the receipts committed to road construction and maintenance.

Today, governments are aggressively promoting the development and purchase of electric vehicles (EVs).  As the number of EVs on the road increases, motor fuel tax receipts have started to dwindle.  Over the next decade, with EV sales goals exceeding 50% in many jurisdictions, the shortfall in fuel taxes is going to be a real problem.  In order to fund road construction and maintenance, new revenue sources will have to be found.

EVs are not going to reduce the need for roads.  In fact, the U.S. is already running behind in highway maintenance.  Investors should be thinking about how this problem can be resolved.  Clearly, EVs are not currently paying their fair share of road costs.  However, if you are trying to find a way to increase the contribution from EV owners, does it makes sense to turn around and subsidize the purchase of new EVs?

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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