A man refuels at a gas station on May 12, 2021 in Fayetteville, North Carolina. (File photo by Sean Rayford/Getty Images)
There is currently a lot of discussion on how vehicle owners should be taxed to support the repair and construction of roads and highways in their respective states.
Regardless of the efficiency of the vehicle or how much gas it uses or doesn’t use per mile, each vehicle has a similar long-term effect on the condition of the roads, and everyone should pay their fair share toward these costs.
In South Carolina, as in many other states, vehicle owners are charged an annual property tax.
But in the Palmetto State, anyway, property taxes are levied and collected by counties for local government services, mostly public schools. Little goes toward county roadwork. None goes toward the 41,000 miles of state-maintained roadways.
For a short period of time, from 1942 to 1946, there was a yearly, $5 per federal tax per vehicle — but not for roadwork. Rather, it helped fund U.S. war efforts.
The federal government first taxed gasoline with the Revenue Act of 1932. That initial penny-per-gallon tax was not to help pay for roads either but to help reduce the government’s deficit amid the Great Depression.
The federal tax didn’t start paying for highways until 1956, when it was increased to 3 cents per gallon to help finance the interstate system.
Since 1993, the federal gasoline tax has been fixed nationwide at 18.4 cents per gallon.
However, what drivers pay at the pump varies by state, since each state sets its own gasoline tax to fund roadways in its borders.
The first state to impose a gasoline tax was Oregon in 1919. South Carolina followed in 1922 with a 2-cents-per-gallon tax. By 1929, all 48 states then in the union had a gasoline tax.
As of Jan. 1, states charged 33 cents per gallon of gasoline on average nationwide, with California charging the most and Alaska the least, according to the U.S. Energy Information Administration.
At 28.75 cents per gallon, South Carolina’s gas tax ranked 29th as of last year, according to the Tax Foundation.
That follows a 2017 state law that increased South Carolina’s per-gallon tax by 12 cents over six years. The road-funding law marked the Palmetto State’s first increase in the tax in 30 years.
Nationwide, the ability for taxes on fuel, licenses, tolls and other dedicated funding streams to pay for roadwork has dwindled over the last few decades. In 2018, only four states raised enough money through those traditional fees, when combined with federal aid, to fully fund their state’s roadways: California, Indiana, Montana and Tennessee, according to the Tax Foundation.
An increase in fuel efficiency — vehicles getting more miles per gallon — plus the rise of electric and hybrid vehicles translates to fewer taxes paid at the pump contributing to roadwork. Obviously, a fully electric vehicle contributes zero dollars in gasoline taxes.
To compensate for this decline, some states have started to implement a highway use fee (or HUF) on vehicles.
In Virginia, for example, all electric vehicles are charged $123 annually at registration. Other vehicles are charged according to their fuel efficiency, starting at $6.66 this year for a vehicle that gets 25 mph and increasing to $97.77 for a vehicle that gets 100 mpg. There is no HUF for a gas guzzler getting less than 25 mph.
Drivers who don’t want to pay the HUF at registration can enroll in Virginia’s Mileage Choice Program and pay per mile by installing a reporting device in their vehicle.
Other states with a voluntary program that charges drivers for their miles driven include Oregon, Utah and Hawaii.
In some programs, the owner is given a choice of a mileage reporting device with or without a GPS. Some vehicle owners don’t want a GPS tracking wherever they drive, which they see as infringing on their privacy.
In South Carolina, the 2017 law that increased gas taxes also created new fees for hybrid and electric vehicles: $60 and $120, respectively, paid every other year at registration.
When I first explained this to people, they misunderstood me. They assumed taxes would be the lowest for the better-performing, more efficient, and less-polluting vehicles and highest for the gas guzzlers.
When I explained that it was exactly the opposite, they understood this was the state’s attempt to have everyone pay more fairly using the roads.
The cost of owning and operating a vehicle in the United States is changing.
Exactly how each state is possibly going to fund roadwork going forward is unknown.
But officials in states nationwide are considering various options beyond the traditional taxes on fuel.
Some argue that other factors need to be considered, such as the vehicle’s weight, its emissions, or the number of miles driven each year.
It does make sense that all vehicles contribute fairly to the road construction in the state in which it is registered.