How Should We Tax Self-Driving Cars?

“Jaguar Land Rover Connected and Autonomo” (CC BY 2.0) by jaguarmena.

Cities and states generate big revenue from parking citations and traffic tickets. San Francisco makes over $100 million a year from parking citations alone. Los Angeles makes $165 million. New York City makes $565 million.

When Level 5 autonomous vehicles (AV’s) hit the road, this revenue could shrink dramatically. In a world where fleets of law-abiding AV’s shuttle passengers around, there will be far less human error, and thus, fewer citation opportunities. That means less money to fund state and local programs like police officer training, wildlife protection, emergency medical services, public improvement projects, and court operations.

As lawmakers write new AV laws, they should consider how to replace this lost future revenue. One option is a road use tax.

Massachusetts’ Proposed Road Use Tax

In Massachusetts, Rep. Tricia Farley-Bouvier and Sen. Jason Lewis recently introduced Bill S.1945, which imposes a “road usage charge” for AV’s (you can read the full text of the bill here). Here are a few of the bill’s key provisions:

2.5 cents per-mile base rate. The bill proposes a “base per-mile rate on autonomous vehicles of no less than 2.5 cents per mile.” The rationale for “2.5 cents” is not stated, but this number could change before the bill is finalized. On its face, it appears to be a palatable number for the average consumer that could still generate substantial revenue for the state. The average U.S. driver travels over 13,000 miles a year. Based on a 2.5-cent rate, that would amount to a $325 road usage bill.

Reduced rates for passengers. The bill proposes a rate reduction “for each passenger … per mile.” In other words, the bill encourages carpooling. The more passengers per vehicle, the lower the rate per mile for that vehicle.

Increased rates for “zombie cars.” There is an increased rate “for each mile traveled without a passenger.” So, the bill discourages the traffic inefficiencies caused by AV’s occupying road space without carrying any human passengers, a phenomenon Senator Lewis calls, “zombie cars.”

This seems reasonable, but there is currently no exemption for an empty ridesharing AV on its way to pick up one or more passengers. Different usage rates based only on passengers physically inside an AV may not truly reflect whether the vehicle is performing a valuable service or idly taking up road space.

Reduced rates for off-peak hours. Higher rates will apply from 8:00 am to 8:00 pm in “severe congestion zone[s].” On the other hand, there will be reduced rates during “off-peak travel hours.”

Reduced rates for low-income passengers and low-access areas. The bill proposes reduced rates for AV passengers “whose personal income, as documented by tax returns or other credible evidence, falls below a threshold established by regulation.” There are also reduced rates for AV’s driving “in specified geographic areas where no or few public transit options are available.”

These provisions aim to lessen the burden of the road usage charge on low-income individuals. They fail, however, to set forth guidelines on how lower rates will be assigned. Will there be an application process with a reviewing agency? Or will lower rates automatically apply based on an individual’s tax returns? In addition, what qualifies as “other credible evidence”? These questions should be considered before the bill is finalized.

Data collection. Each AV must capture and store data including “real-time distance traveled and real-time number of passengers.” This data must be stored for up to 18 months in a manner that can be “cross-referenced” by the Massachusetts Department of Transportation (MDOT).

Privacy concerns. AV passengers will naturally be hesitant to self-report information about themselves and their mileage statistics to local authorities. Under the proposed rules, MDOT must be able to “cross-reference” passenger data, i.e., access it independently without the passenger’s consent.

This level of government access to passenger data has been fiercely opposed by privacy advocates in relation to conventional cars. It remains to be seen whether it will be deemed tolerable for the purposes of collecting a road use tax for AV’s.

Alternative to a Road Use Tax Based on Mileage & Passenger Data: Vehicle Categories

Mileage and passenger data may generate precise usage rates, but this system presents difficult privacy issues. It also places a high burden on manufacturers to install systems that accurately capture that data and ensure that it is not hacked, leaked, or corrupted.

Instead, lawmakers should consider a road use tax for AV’s based on vehicle categories. For example —

  • Category 1: Consumer AV less than 4,000 lbs. / Tax: $100
  • Category 2: Consumer AV more than 4,000 lbs. / Tax: $200
  • Category 3: Ridesharing AV / Tax: $300
  • Category 4: Long-haul AV truck / Tax: $400

These numbers are admittedly rough. The point is that a ridesharing AV can be expected to drive more miles than an individually-owned consumer AV. Long-haul AV trucks can be expected to drive even greater distances. A road use tax could be imposed on AV owners based on these broad vehicle categories (and adjusted based on how lawmakers want to incentivize the use of each kind of vehicle).

A category-based approach might overtax and undertax certain users. On the other hand, it reduces the need for independent government access to passenger data. It also sets up a more predictable tax rate for AV owners and a more predictable income stream for cities and states.

Ultimately, whichever tax scheme prevails could significantly impact the way manufacturers design and deploy AV’s.

You can track new state-by-state AV legislation here.

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Author: Jesse Krompier

Autonomous vehicles, V2V, and transportation law.

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