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Guest commentary / Reducing our dependence on oil

Don’t tax electric cars; stabilize tax revenues instead

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By Steve Marshall and Dan Davids
Washington state has a problem. We rely on oil for virtually all of our transportation. Imported fuel cost state citizens $16 billion in 2008 and may top that this year.
Washington drivers are paying more than $3.25 a gallon for regular-grade gasoline today, up 40 cents in just one year. Think of this as a new tax hike we pay to foreign oil producers — more than our current total state gasoline tax of 37.5 cents.
And it will get worse. John Hofmeister, former CEO of Shell, predicts that gasoline will be $4 a gallon this year and $5 a gallon by November of 2012. China, now the world’s largest car market, and other emerging economies are driving demand for oil to new highs.
World oil supplies are not keeping up with demand. And the recent unrest in Tunisia, Egypt, Yemen and Jordan raises questions about the long-term stability of Saudi Arabia and other undemocratic OPEC members who control most of the world’s conventional oil supplies.
You would think our elected officials would be doing all they could to reduce our dangerous reliance on oil.
Also, although it is not fully appreciated, Boeing’s commercial aircraft business ultimately depends on moderate and stable oil prices. As fuel prices increase, airlines will raise ticket prices to cover the costs, which will result in fewer passengers and fewer orders by airlines for new jets.
Right now we don’t have a choice in fuels, but that could change with the right policies. At the top of the list is to move from imported oil to our state’s clean domestic electricity. Electric cars are coming, and we should do all we can to accelerate that transition. Boeing may not be able to make electric jets, but electric cars would cut demand for oil and indirectly help stabilize jet fuel prices. And instead of sending oil dollars out of the state, we could be keeping electric dollars here.
But there is a bill in the Legislature that has it backwards. Instead of making the transition from oil more rapid, it would impose a tax on electric vehicles just at the time that we need to do the most to encourage high production and sales.
Although our Legislature can’t do anything to drill for more domestic oil — we don’t have any in this state — it can lead the shift to the electricity we do have.
State legislators worry that per capita gasoline tax revenues are going down as people drive less and buy more fuel-efficient cars. Some legislators say that taxing electric vehicles is a way to make up those lost gas tax revenues. But for the next few years, there will be only small numbers of electric cars on state roads, so taxing them won’t help our current state financial crisis. Instead, it sends the wrong message about what is in our long-term best interests. We need another solution.
Variable road pricing may eventually emerge as an answer to declining gas tax revenues. The Puget Sound Regional Council assumes that most roads in the region will be tolled by 2040. But it may take years to convince skeptical voters to accept new road user fees. Even then, putting a new road revenue system in place will take time.
In the interim, there is a way for the Legislature to stabilize gas tax revenues that would also encourage the transition from foreign oil to our own domestic electricity.
The Legislature should set as a baseline an amount equal to the highest year of gas tax revenues. Each year, if revenues fail to meet the baseline, the per gallon gasoline tax would be adjusted to ensure that the same baseline level of revenues are collected. An inflation adjustment could also be added to ensure the same purchasing power for road repair and construction.
The vote on a tax on electric vehicles will be a test: Are we serious about cutting our dependence on imported oil or not? Do we want to keep more of our fuel dollars at home, help avoid $4 a gallon gas and cut pollution? If so, we need to send a strong and consistent signal that the days of oil’s dominance in transportation are numbered.

Steve Marshall is a nationally recognized expert on energy and transportation and has organized and moderated a series of Beyond Oil conferences. Dan Davids is president of Plug In America, the nation’s largest consumer-focused electric vehicle advocacy group.

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