A Glimmer in the Darkness

It looks like the General Assembly is actually taking seriously the possibility that revenues from the gas tax may one day become inadequate to fund Virginia’s transportation needs. (It’s already inadequate, but it will become even more inadequate.) As Bacon’s Rebellion has warned repeatedly, as motorists shift to hybrid vehicles, electric vehicles and other more exotic automobiles over the next decade or so, revenues from the gasoline tax will decline precipitously.

Well, a Joint Subcommittee Studying Fuel Efficient Vehicles and Transportation Funding, chaired by Sen. Frank Wagner, R-Virginia Beach, invited various transportation experts to testify and everyone concluded, yes, there is a problem. States an executive summary of the Subcommittee report:

Based on current gas prices, current consumer demand, and Congress’ recently-enacted CAFE standards, the current methods of transportation funding in the Commonwealth will not keep pace with new energy technologies being used for motor vehicles (e.g., hybrid vehicles; increased use of alternative fuel) and the Commonwealth will see a decrease in motor vehicle fuels tax revenues.

Jonathan Gifford, a professor at George Mason University’s School of Public Policy, laid out a number of policy alternatives, including: increasing the fuel tax, eliminating fuel tax exemptions, cutting transfer payments to transit, imposing more tolls (HOT lanes, road metering), and congestion pricing. Bacon’s Rebellion’s preferred option, a Vehicle Miles Driven tax, apparently was not considered (unless road metering amounts to the same thing).

It’s progress of a sort. At least the General Assembly recognizes that it has a problem. It remains to be seen if it will actually do anything about it.

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  1. Larry Gross Avatar
    Larry Gross

    If you follow the links.. you can see another report which is interesting especially in terms of the impact that more fuel-efficient cars will have on the demand for oil.

    but the reports analysis was based on hybrids – not plug-in hybrids.

    Plug-in hybrids would considerably accelerate the trends indicated in the study.

    “Ford is testing a new plug-in hybrid Explorer concept that could get up to 120 mp

    Currently in testing, the Escape PHEV runs primarily on electric in
    its commuting duties, achieving around 30 miles of high-efficiency
    electric drive after an overnight charge of its high capacity Lithium-
    Ion battery pack. For longer trips it reverts seamlessly back to
    normal hybrid operation.


    so.. you have a guy that commutes 30 miles in each direction every day and, in the process will not only not buy one penny worth of gasoline but not pay one penny of gas tax either.

    EVERYTHING depends on a breakthrough in battery technology but at this point if I were a betting person, I would not bet against the breakthrough and so would it result in essentially opening the floodgates on commuters switching to plug-ins as HOT lanes come online?

    The presentation indicated that things won’t play out fully with hybrids until 2030.

    But I wonder if he underestimated the potential swiftness at which change could take place if Plug-ins come to the market in the next couple of years.

    PLUG-ins have the potential to be a transformational technology causing huge shifts in the marketplace and in public policy and infrastructure. Don’t forget the impact on electricity generation.

    But the biggest impact will be, as always, at high slow and behind the curve government is when reacting to technology.

    So.. if plug-ins become a reality, it will become a “race” to see if the GPS-metering technology or elctric metering of plug-ins can be implemented quicker than toll roads using EZ-Pass and high-speed tolling gantries.

    Wanna guess which one wins the race?

    oh.., and for the folks worried about how you can’t toll any/every road. Correct – so they’ll raise the tolls on the roads that CAN be tolled to compensate.

    Don’t believe it?

    Check out New Jersey’s and Texas plans to do .. just that…

    Prediction: There will be a food-fight between transit and road interests to see who gets the cash-cow revenues from toll roads.

    Now.. if ordinary smucks like us can envision the potential trends.. you can bet the folks at VDOT are paying attention.

  2. Anonymous Avatar

    You guys worry too much.

    The average age of a car on the road today is 9 years, of trucks, 8years. Hybrids are a small portion of the sales of new cars, and it will take a long time for them to make a serious dent in gas taxes.

    Remember, the 1985 Honda Civic CRX got 57 mpg. But, it weighed very little, had a tiny engine, no power steering, power brakes, air coditionong or crash protection. Still, nothing on the road today matches that performance. We will make more savings from switching to carbon fiber cars than we will from improving batteries, in the near term.

    The real problem with the gas tax is that it is nowhere near high enough, and hasn’t been for decades.

    Yes, we can no doubt invent and install much more complicated methods of charging for road use. But they willhave the same fundamental problem the gas tax has had: no one will want to step up and raise the rates when they need to be raised.

    It is not going to be any easier to increase the tolls than it is the gas tax. NJ is raising the tolls, and NJ residents are furious at the Governor. NJ is one of the richest states in the nation, with the highest real estate and other taxes and yet they are in a fiscal crisis – they can’t control their spending.

    But, they do have a program to convert all their schools to solar, even though it isn’t (yet) cost efficient.

    Larry is correct: they will raise the tolls on the roads where they can be raised. And this will create exactly the kind of subsidy situation Larry so despises.

    People who are constrained to use the toll roads will be subsidizing those other roads, and people who drive off peak, etc. Eventually, people will adapt, and the existence of toll roads in some areas and not others will affect home prices and rents.

    Larry is also correct that there will be a food-fight between transit and road interests to see who gets the cash-cow revenues from toll roads.

    It’s too bad that it will come to this, because no one is seriously considering what the best mix of investments should be, or how to fund them to best advantage and most equitably.

    It is all a selfish race to get mine at the other guys expense, using any kind of schlock analysis and spin to win points.

    We will continue to make economic decisions on a political basis, and we will continue to wonder how things got to be so “inequitable”, and inefficient.


  3. Larry Gross Avatar
    Larry Gross

    “Larry is correct: they will raise the tolls on the roads where they can be raised. And this will create exactly the kind of subsidy situation Larry so despises.”

    to a certain extent.. the higher the tolls.. the less demand for more roads… and the more individuals will decide how much driving they really need verses how much they want.

    When someone is too cheap and costs less than it costs to provide it – demand outstrips supply…so we get “congestion” that, depending on who you believe “costs” people a 1000 bucks a year.

    Well.. I’m betting if they have to pay 1000 bucks a year more that congestion might well disappear.


  4. Anonymous Avatar

    If you are right, the higher tolls will mean people eventually re-arrange their lives to drive less.

    Then the tolls will be a subsidy for those that sell or rent property in what have suddenly become the “right” places to live.

    If the tolls are too high, those places will be subsidized just as surely as homes in far out areas are subsidized if the tolls are too low.

    But in that case, a subsidy would be OK, right?


    “I’m betting if they have to pay 1000 bucks a year more that congestion might well disappear.”

    Assume that they were going someplace for a reason, some reason that made it worthwhile to pay whatever it cost. (We can agree or disagree that the cost is artificially low.)

    If the cost is artificially low, then whatever business they were out and about for, is being subsidized.

    If the cost of travel is artificially high, then that business won’t happen: the business is no longer worth the cost. Since those people don’t travel, they don’t pay the 1000 bucks a year, either.

    In that case, nobody gets the thousand bucks, and the nobody gets the business. The businesses that lost out wind up subsidizing the lack of congestion – until they go out of business.

    That is what demand reduction means. It is an effective way to prevent congestion, but the costs might be a lot higher than 1000 bucks.

    People can only decide how much travel they need vs how much they want, if the price is exactly right. Too low, they travel too much, too high they travel to little.

    Either way is a subsidy for someone.


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