The Case for Taxing Self-Driving Cars

You may not give it much thought, but each time you fill up your gas tank at the pump, you're also filling federal and state coffers via fuel taxes.

With an estimated 263.6 million registered passenger vehicles in the US as of 2015, that's a lot of money. But fuel tax revenue has declined in recent years because the federal fuel tax has not been raised since 1993, and is not indexed to inflation, while passenger vehicles are more fuel-efficient than ever.

States such as Oregon and Illinois have implemented vehicle-miles-traveled (VMT) tax pilot programs in an effort to shore up declining fuel taxes. But that involves tracking drivers, a privacy headache for policy makers.

Revenue could dip even further as people ditch personal vehicles and call an autonomous Lyft or Uber to get around. And that's where some state lawmakers are zeroing in: taxing self-driving vehicles.

In March, a pair of Massachusetts state senators introduced bills that would impose a 2.5 cent-per-mile tax on self-driving cars. The Tennessee state Senate has already approved a measure to implement a tax of 1 cent per mile on autonomous cars and 2.6 cents per mile on self-driving trucks with two or more axles, according to The Detroit News.

The Eno Center for Transportation has also proposed a 1-cent-per-mile tax at the federal level on autonomous cars. The Washington, D.C.-based think tank presumes that autonomous vehicles will operate primarily in managed fleets and fees would be collected as part of the charge for operating or using robo-taxis.

The report's author, Paul Lewis, told Automotive News that a per-mileage fee on self-driving vehicles would supplement dwindling fuel tax revenues and alleviate some concerns with VMT systems, such as outfitting and tracking individual vehicles. "The politics is much easier than a traditional VMT," he added.

Recommended by Our Editors

Will 'Invisible Messages' in Street Signs Steer Self-Driving Cars?

In addition to a decline in gas taxes, other losses in revenue directly related to self-driving cars could hit cities particularly hard. At an autonomous vehicle conference in Detroit this week, Jeffrey Tumlin, director of strategy at the transportation planning firm Nelson/Nygaard noted that New York City has lost 10 percent of its annual bus ridership since 2013. He blames ride-sharing services such as Uber and Lyft, which are both working to make their fleets autonomous.

Beyond the loss of revenue from, say, bus or subway fares, Tumlin pointed out that pension systems are also funded by public transportation. "So if a public transit agency is contracting—losing 10 percent of the workforce every year in order to respond to changing mobility options—their pensions are at risk," he said.

Intel recently predicted that the "Passenger Economy" created by the advent of autonomous vehicles will expand from $800 billion in 2035 to $7 trillion by 2050 by providing everything from robo-taxi services and captive marketing to self-driving car occupants and mobile retailing. If this figure is even close to accurate, you can bet that politicians will want a piece of the self-driving car revenue pie—although consumers will likely end up paying these taxes per mile rather than per gallon at the pump.

Don Butler, Executive Director, Connected Vehicles and Services at Ford