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TITLE: fuel; electric cars; hybrids; taxes |
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SPONSOR: Campbell |
STATUS: As Amended by House TRANS |
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PREPARED BY: Jordan Johnston |
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Description
The bill would increase existing motor fuel taxes, implement new motor fuel taxes on natural gas and propane, and implement new flat taxes on electric and hybrid vehicles. If the Legislature subsequently repeals the flat taxes on electric and hybrid vehicles, HB 2899 would impose an electricity tax per kilowatt on electric vehicles. In addition, the bill would establish the Arizona Road Use Account (ARUA) in the Highway User Revenue Fund (HURF). The bill also mandates various reporting requirements and creates requirements for retail dispensing of natural gas.
Estimated Impact
The JLBC Staff estimates that the increase of current motor fuel taxes, creation of new motor fuel taxes, and creation of new electric and hybrid vehicle flat taxes would increase ARUA revenues by $1.0 billion in FY 2021, $1.3 billion in FY 2022 and $1.6 billion in FY 2023.
If the Legislature subsequently repeals the flat taxes on electric and hybrid vehicles, the bill would increase ARUA revenues by $1.2 million in FY 2021, $1.2 million in FY 2022 and $1.7 million in FY 2023 in the form of new electricity per kilowatt taxes.
Analysis
The bill would make the following changes:
· Increase the taxes per gallon of gas and light class diesel by 24 cents in FY 2021, 6 more cents in FY 2022, and 6 more cents in FY 2023 (for a total increase of 36 cents).
· Increase the taxes per gallon of use class diesel by 32 cents in FY 2021, 6 more cents in FY 2022, and 6 more cents in FY 2023 (for a total increase of 44 cents).
· Implement a natural gas tax per gas gallon equivalent (GGE) of 24 cents for light class natural gas and a per diesel gallon equivalent (DGE) of 32 cents for use class natural gas in FY 2021. It would increase each tax by 6 more cents in both FY 2022 and FY 2023.
· Implement a propane tax per gallon of 18 cents for light class propane in FY 2021. It would increase by 5 more cents in both FY 2022 and FY 2023.
· Implement a propane tax per gallon of 22 cents for use class propane in FY 2021. It would increase by 4 more cents in both FY 2022 and FY 2023.
The bill would also implement an electric vehicle tax of $111 in FY 2021, $139 in FY 2022, and $166 in FY 2023 and a hybrid vehicle tax of $45 in FY 2021, $56 in FY 2022, and $67 in FY 2023. The bill requires the Arizona Department of Transportation (ADOT) to study the feasibility of converting the electric and hybrid vehicle flat tax rates to a kilowatt per mile tax rate equivalent. Upon repeal of the electric and hybrid vehicle flat taxes, the bill would implement an electricity tax per kilowatt for light class and use class vehicles of 2 cents in FY 2021 and FY 2022 and 3 cents in FY 2023.
Each tax would be annually indexed to the GDP implicit price deflator (inflation) from FY 2024 forward. Although the increased tax revenues are to be initially deposited in the newly formed ARUA, the revenues are to be released monthly to HURF, albeit with restrictions on permissible use.
(Continued)
Using data from the ADOT annual HURF forecast, the JLBC Staff estimated each fiscal year's revenue from existing tax rates. We then modified that forecast to account for the draft bill's increased rates. Using data from the U.S. Data Energy Information Administration (EIA), we determined the average fuel consumption in gas gallon equivalents for light class and use class vehicles powered by natural gas or propane. We applied those averages to ADOT's registered vehicle counts for natural gas- and propane-powered vehicles to determine those fuels' consumption in Arizona. We applied the draft bill's tax rates to that consumption.
There are about 15,500 electric vehicles in Arizona according to ADOT data as of June 2019. While ADOT records no data on hybrid vehicles, EIA data suggests that of the 240.9 million vehicles in the U.S., 1.8% are hybrid vehicles. If we apply that proportion to the 4.3 million passenger vehicles in Arizona, then the state would have 78,500 hybrid vehicles. We applied the draft bill's tax rates to those vehicles. This analysis does not consider population growth and subsequent growth in vehicles in the state.
Table 1 outlines the revenue increase for the increase of current motor fuel taxes, creation of new motor fuel taxes, and creation of new electric and hybrid vehicle flat taxes for FY 2021 through FY 2023. We have assumed the tax is implemented on July 1, 2020.
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Table 1 |
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HB 2899 Revenue Increase Above Current Law by Year |
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FY 2021 |
FY 2022 |
FY 2023 |
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Motor Fuel |
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Gasoline |
$737,866,700 |
$941,666,700 |
$1,152,200,000 |
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Light Class Diesel |
46,187,900 |
59,824,800 |
74,209,400 |
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Use Class Diesel |
246,349,700 |
303,130,500 |
362,822,800 |
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Light Class Natural Gas |
47,600 |
59,500 |
71,400 |
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Use Class Natural Gas |
1,793,900 |
2,130,300 |
2,466,600 |
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Light Class Propane |
1,540,700 |
1,968,600 |
2,396,600 |
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Use Class Propane |
_ 138,700 |
_ 163,900 |
_ 189,100 |
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Subtotal - Motor Fuel |
$1,033,925,200 |
$1,308,944,300 |
$1,594,355,900 |
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Vehicles |
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Electric |
$1,696,000 |
$2,123,800 |
$2,536,300 |
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Hybrids |
3,531,000 |
4,394,100 |
5,257,200 |
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Subtotal - Vehicles |
$5,227,000 |
$6,517,900 |
$7,793,500 |
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Total |
$1,039,152,200 |
$1,315,462,200 |
$1,602,149,400 |
Table 2 outlines the revenue increase by category for FY 2021 through FY 2023 for the electricity per kilowatt tax. The bill outlines rates for FY 2021 through FY 2023, and states that the new tax goes into effect only upon repeal of the flat electric and hybrid vehicle taxes reflected in Table 1.
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Table 2 |
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HB 2899 Revenue Increase Above Current Law by Year |
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FY 2021 |
FY 2022 |
FY 2023 |
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Alternative Fuel |
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Electricity (Kilowatts) |
$1,156,200 |
$1,156,200 |
$1,734,300 |
(Continued)
Potential Macroeconomic Impacts
Beyond the direct HURF impacts, the following macroeconomic components may also affect the bill's overall impact: 1) increased prices from the bill on fuels and vehicles may reduce demand for motor fuels and vehicles; 2) the increased price of gas may reduce consumer spending on other goods; and 3) the effect of significantly increased highway construction spending on the state economy. These different components could likely both increase and decrease state non-HURF revenue. An analysis incorporating those elements in greater detail is beyond the scope of this limited analysis.
Local Government Impact
Local governments receive 49.5% of HURF revenues. The bill is estimated to increase local HURF revenues by $514.4 million in FY 2021, $651.2 million in FY 2022 and $793.1 million in FY 2023 from the increase of current motor fuel taxes, creation of new motor fuel taxes, and creation of new electric and hybrid vehicle flat taxes.
2/28/20