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January 30, 2023

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Lawmakers explore ways to fuel the Nevada’s highway fund

Tesla Supercharge Station at the LINQ High Roller

Wade Vandervort

Tesla vehicles are parked at a new Tesla Supercharger station next to the LINQ High Roller on Tuesday, July 23, 2019.

As Nevada continues to push a green-energy agenda and looks forward to the rise of electric vehicles and the demise of inefficient engines powered by fossil fuels, it’s also being forced to rethink how to pay for constructing new highways and maintaining those already existing.

A chunk of Nevada’s highway budget is funded through a state tax collected on every gallon of gasoline sold. But as more and more gas-guzzling cars are replaced by fuel-efficient cars and electric vehicles, less and less money is being collected via the gas tax.

Preliminary discussions on how to get ahead of the problem have already begun among some state lawmakers. And while State Sen. Chris Brooks, D-Las Vegas, says newer vehicles running with much better fuel-efficiency is a big factor in the state collecting fewer gasoline tax dollars, electric cars also are playing a role.

“While electric vehicles are a really tiny, tiny part of that problem, they will become a much larger part of that problem if we don’t address it early on,” said Brooks, who serves as vice chair of the interim Legislative Commission on Energy and also sits on a work group tasked by Legislature to investigate funding issues around electric vehicles.

The state levies different taxes at the point of purchase for gasoline. Combined those gas taxes total around 18.5 cents a gallon, not including any county or federal levies.

Around 17.7 cents per gallon from the state’s levy goes into the state highway fund for numerous projects, including construction and maintenance.

Through the years, though, while the number of drivers and vehicles have increased, the amount of money drivers were paying out on average in gasoline taxes to the highway fund has decreased.

For example, in 2008, there were 1.72 million licensed drivers in Nevada, and the state collected $197.6 million for the highway fund from gas taxes. In 2018, there were 1.94 million licensed drivers in the state, with $210.6 million put into the highway fund from gas taxes.

Of course, not every driver pays the same amount in gasoline taxes, nor do Nevada drivers pay 100% of the state gas taxes. But in 2008 the state collected $114.90 per Nevada driver, about $6.30 per driver more than the average in 2018.

The Nevada Department of Transportation estimated the annual miles traveled on the state’s highways in 2004 was 20.5 billion. In 2018, that number was 27.5 billion.

Brooks outlined some hypothetical solutions to keeping the highway fund solvent. One, which has been discussed in other states, is shifting the tax from point-of-purchase at a gas station to a tax per mile on vehicle travel.

Brooks’ idea, he said, is to look at the vehicle miles traveled in electric cars, and compare them to the miles per gallon energy equivalent, a comparison detailing the amount of, in this case, an electric energy equivalent to a gallon of gasoline.

“That is, I think, the best model, but we have to look at indexing it for a changing transportation budget and indexing it for inflation, which we’ve never done at the state level,” Brooks said.

No state has instituted a vehicle miles traveled, or a VMT, tax across the board, though Oregon has a voluntary program in which 5,000 drivers pay a tax of 1.5 cents for each mile driven and are issued gas tax refunds. Illinois has a voluntary VMT tax program for commercial trucks.

A VMT tax on all vehicles — gasoline-powered and electrical — would address a problem identified by two faculty members at University of California, Berkeley.

In a paper published by Berkeley’s Energy Institute at Haas, Lucas Davis and James Sallee argue that gasoline tax has become a regressive tax. They argue that people with higher incomes are more likely to be able to afford electric cars, leaving poorer people to pay the gasoline taxes.

There was an effort in the 2019 Nevada Legislature, introduced by Senate Minority Leader James Settlemeyer, R-Minden, that would have instituted point-of-purchase tax at electric charging stations.

“How can that be done and make it rational?” Settlemeyer said in introducing his bill. “The idea of having drivers pay at a pump for electricity and adding a 10 percent surcharge was the result.”

The Senate Committee on Growth and Infrastructure gave the bill one hearing, then effectively killed it by taking no further action on it.

Brooks said that having different taxing systems for electric and gasoline cars could discourage the adoption of electric cars. He’s in favor of an overall change to the system. He said he was expecting some of the proposals to come out of the Energy Commission to deal with the issue.

“I think that anything that addresses just electric vehicles is just a Band-Aid and does almost nothing to solve them problem,” Brooks said. “We need a structural overhaul of the highway fund funding mechanism, otherwise we’re just going to (pick) something that arbitrarily taxes one type of vehicle differently than how we tax the other types of vehicles.”