April 23, 2014

Electric cars cheap to run? The tax backlash begins

Electric Cars - Cheap to run. For now.

In the first case of a tax backlash against the electric car, Washington State proposes a levy on electric cars to compensate for the loss of revenue on fuel tax.

Proponents of Electric Cars claim two USPs when they urge you to see the light. One is the zero emissions they claim for their fascination, the other the cheapness of the fuel. ‘It costs the equivalent of  just pennies a gallon to fuel’ they claim. And it does. For now.

The ‘Zero Emissions’ bunkum is easily dispelled. As much of the electricity we produce is derived from fossil fuels, you’re simply moving the pollution elsewhere. Which for a city like London is a good idea, even if it is rather NIMBY.

The ‘Cheap to Fuel’ mantra is true – but only for now. Scour the pages here and you’ll see us endlessly warning that as soon as electric cars become significant in number – if in fact they ever do – we’ll see governments around the world shift from subsidising the purchase of electric cars to imposing a levy or taxing electricity used for cars. And it’s already being proposed.

Washington State in the US is proposing a $100 levy each year on electric cars to compensate for loss of revenue to the State. The claim – absolutely fairly – is that the electric car driver is not paying a fair share, that the money to look after the States roads has to come from somewhere and why should drivers of regular cars subsidise the electric car owner?

It’s exactly what we’ve been shouting about; how can any government – especially the UK government – afford to forego tax revenue lost on electric cars? The simple fact is – it can’t. To ‘Balance the Books’ – assuming the electric car owner would have done 10,000 miles a year in a car that did 30mpg – would mean a levy of  about £1,250 pa*.

Which would probably put most buyers off an electric car. Even if they were previously swayed by the arguments that tried to convince them an inferior product was worth paying more for.

(* Assuming petrol at £1.34 a litre and taxed at total 63%)
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