Elec­tric cars will de­liver big tax jolt

Ottawa Citizen - - FRONT PAGE - RAN­DALL DEN­LEY Ran­dall Den­ley is an Ot­tawa com­men­ta­tor and nov­el­ist. Con­tact him at ran­dallden­[email protected]

To lis­ten to them talk, our fed­eral and On­tario gov­ern­ments can’t wait for the planet-sav­ing elec­tric car fu­ture to get here. They are so keen that they are sub­si­diz­ing elec­tric cars and even build­ing a net­work of charg­ing sta­tions for them.

What we don’t hear about is the huge ef­fect on fed­eral and pro­vin­cial rev­enues if the gov­ern­ment’s rhetoric be­comes re­al­ity and peo­ple turn to elec­tric cars in large num­bers. A big re­duc­tion in gas tax would se­ri­ously af­fect Canada’s abil­ity to pay for roads but it would also un­der­mine a top source of tran­sit dol­lars.

Fed­eral and pro­vin­cial gov­ern­ments will col­lect $23.5 bil­lion in gaso­line and diesel taxes this year, ac­cord­ing to the Cana­dian Tax­pay­ers Fed­er­a­tion. In ad­di­tion, they will take in nearly $1.8 bil­lion in sales taxes.

Then there are the new car­bon taxes. In an all-elec­tric fu­ture, this whole pyramid of tax will col­lapse. Even a sig­nif­i­cant ad­vance for elec­tric cars will erode gov­ern­ment tax rev­enues.

That will have the ef­fect of also un­der­min­ing gov­ern­ments’ tran­sit plans. In Ot­tawa, for ex­am­ple, the LRT project is paid for pri­mar­ily with fed­eral gas tax money. Pro­vin­cial gas tax dol­lars are also go­ing into the project.

For mu­nic­i­pal­i­ties, the gas tax is an im­por­tant source of scarce in­fra­struc­ture money. The fed­eral gas tax fund pro­vides them with more than $2 bil­lion a year. In On­tario, the pro­vin­cial gov­ern­ment dis­trib­utes $334 mil­lion of its gas­tax rev­enues, an amount that will in­crease to $642 mil­lion by 2021-22.It is meant as a sta­ble source of funding for tran­sit.

De­spite their gen­eros­ity, both the On­tario and fed­eral gov­ern­ments keep the lion’s share of gas-tax rev­enue for them­selves. In On­tario, the gaso­line tax is ex­pected to gen­er­ate nearly $2.7 bil­lion this year. All but the mu­nic­i­pal­i­ties’

Tak­ing in less in taxes won’t be an op­tion, but re­plac­ing the lost bil­lions won’t be easy.

share goes into gen­eral rev­enue. The fed­eral gov­ern­ment col­lects $5.5 bil­lion in fuel taxes, net­ting $3.5 bil­lion af­ter mu­nic­i­pal­i­ties get their slice.

De­spite the pop­u­lar con­dem­na­tion of so­called gas guz­zlers, when it comes to au­to­mo­biles, gov­ern­ments are tax guz­zlers. Tak­ing in less in taxes won’t be an op­tion, but re­plac­ing the lost bil­lions won’t be easy.

Cash-hun­gry gov­ern­ments else­where are al­ready work­ing on the prob­lem. So far, 17 Amer­i­can states charge elec­tric ve­hi­cle fees rang­ing as high as $300 a year. Even in elec­tric-friendly Cal­i­for­nia, a $100 fee is be­ing im­posed on all zero-emis­sions ve­hi­cles. Seven states have elim­i­nated sub­si­dies for elec­tric ve­hi­cles. A fed­eral tax credit of $7,500 is set to ex­pire in a few years.

An­other po­ten­tial so­lu­tion is a mileage fee for driv­ing a car. Self-driv­ing cars are the first point of at­tack. Ten­nessee has ap­proved a per-mile fee for driverless ve­hi­cles and Mas­sachusetts has in­tro­duced sim­i­lar leg­is­la­tion. In Bri­tain, gaso­line taxes have al­ready started to de­cline and there is con­sid­er­a­tion of a broader per-mile charge. Ver­mont and Ore­gon are look­ing at the same so­lu­tion.

It’s not dif­fi­cult to see the spin chal­lenge gov­ern­ments will face. They will have to switch the per­cep­tion of driv­ing an elec­tric car from a virtue to be re­warded to an every­day ac­tiv­ity to be taxed.

It’s tough to tell peo­ple that you don’t want them to use gaso­line, then im­pose a fee for not us­ing gaso­line, and that’s the easy part. The per-car fees for electrics are triv­ial but some­thing far more sub­stan­tial will have to be done if the bil­lions in lost gas tax are to be re­placed.

None of the so­lu­tions are at­trac­tive. The idea of gov­ern­ment charg­ing you for ev­ery kilo­me­tre you drive seems po­lit­i­cally un­saleable. Road tolls are an op­tion, but the On­tario gov­ern­ment ve­toed a Toronto plan to im­pose tolls on its ma­jor ex­press­ways.

If tolls are charged, peo­ple would rea­son­ably ex­pect the money to go to­ward roads, not tran­sit or the gen­eral pro­vin­cial pot.

We are still in the elec­tric car hon­ey­moon pe­riod, but un­pleas­ant de­ci­sions lie ahead.


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