In California motorists pay 69 cents of state taxes for each gallon of gas they pump into their cars, more for diesel. Add to that another 18.4 cents per gallon for federal excise taxes, and it could go higher in some counties. In 2009 that generated almost $3.2 billion in revenue for the state of California, most earmarked for the construction and repair of our roads and highways. California is close to tied with New York when it comes to the highest state taxes for the purchase of gasoline.
California, especially in the south, has the unfortunate combination of high population density and concave topography that can trap particulates and create air pollution. To reduce pollution and wean people from fossil fuels, incentives were developed to get people to buy fuel saving vehicles and eventually hybrids and electric cars became popular, and may likely become ubiquitous in the next several years. One such incentive was the right to use the carpool lane with only one person driving their new Prius.
This was not an easy transition since the economics of buying a hybrid required a lot of miles and a long period of time owning the car before you could justify the premium prices. Nevertheless, many socially conscious people stepped up and happily paid the premium to do what they considered the “right thing.” But the picture is beginning to change and new challenges are cropping up, a result of the ramifications of this sociological, environmental and technological shift.
Electricity costs are increasing as coal-fired power plants are being phased out. Solar and other renewable energy sources cost more on the basis of producing a kilowatt of power, though the benefits are obvious, important and substantial. But those with the electric cars will be paying increasingly more to charge their vehicles. A few companies (e.g. Kingston Technology) are providing free charging stations at work, but thus far that is the exception more than the rule.
Now another problem has come to the fore. Gasoline tax revenues have fallen rather dramatically, and the state of California is studying a “pay per mile” tax to make up for the shortfall in revenue for roads and highways. This could have the unintended effect of shifting some of the costs from cars that are gas-guzzlers to the gas-misers. Other countries have innovative ways to avoid this problem. Germany, for example, charges high-polluting trucks and cars more than cleaner ones, so fewer of those dirtier trucks are now on the road. Singapore has cut gridlock by levying a higher road charge during rush hour and on busy roads. Many different ideas can be incubated to get the right combination of revenue balanced by solving for problems such as weaning us from fossil fuels, reducing air pollution and traffic gridlock.