Fuel economy, electric vehicles, and the future of US infrastructure funding

Abstract

This paper examines how fuel tax policies affect the generation of revenue to maintain the US road infrastructure. Currently, deferred maintenance and outdated policies have led to a budget deficit to both finance new projects and maintain the existing infrastructure at the state and national levels. Gas taxes are the main source of tax revenue currently, but improvements in fuel efficiency and the introduction of electric vehicles (EVs) will exacerbate this problem in the coming years. In this thesis, I develop a model to simulate tax revenues over time as a function of vehicle fleet turnover, consumer vehicle choice, and the design of policies such as fuel taxes and registration fees. Using data from the Ohio Department of Transportation, I simulate the effect of a range of tax policies including gas taxes, and vehicle miles traveled (VMT) taxes relative to the baseline set of policies recently adopted in the state of Ohio. My analysis shows the tradeoffs and complexities between different policy structures seeking to satisfy both infrastructure funding and emissions reduction policies concurrently. The best policies combine taxes to both gasoline vehicles and EVs, but balances taxes to sustain the relative attractiveness of EVs to achieve long-term greenhouse emissions reduction. Keywords: Gas Tax, Tax Policy, Infrastructure Funding, Electric Vehicles, System Dynamics