"In the United States, road infrastructure funding is declining due to an increase in fuel efficiency and the non-adjustment of fuel taxes to inflation. Legislation to tax plug-in vehicles has been proposed or implemented in several states. This paper assesses (1) the magnitude of the decline in federal fuel tax revenue caused by plug-in vehicles and (2) quantifies the revenue that could be generated from a federal plug in vehicle registration fee.

Key findings

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This paper shows that an increase in the federal fuel tax rate would generate significantly more revenue than the tax on plug-in vehicles.

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As price elasticity decreases, fewer buyers are dissuaded from a higher price for plug-in vehicles. A higher discount rate has a similar effect because buyers discount the future more heavily which lowers the additional cost of the plug-in vehicles at the beginning.

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Plug-in vehicles do not contribute much to the funding shortfall and that levying a tax or registration fee will not generate significant additional revenue is relatively stable across the scenarios.

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