The world is focused now on a public health crisis and the economic disruption caused by the appropriate policy response. The current environment is likely to have long-run structural effects on society. However, well before the pandemic crisis a transportation revolution already was on the horizon, a change that might be accelerated by the current economic disruption.
General Motors (GM) chief executive officer Mary Barra has committed GM to a vision of ‘zero crashes, zero emissions, and zero congestion’ through a transportation revolution of electric, autonomous vehicles. The other traditional automobile firms, newer electric-vehicle firms such as Tesla, autonomous vehicle firms such as Waymo (Google), and firms developing autonomous freight trucks all are involved in building toward this revolution.
Several consistent perceptions or predictions are emerging about how transportation may evolve in a very recent and still somewhat sparse literature. Most suggest that there will be fewer registered vehicles overall, including a decrease in the number of vehicles owned by households. Rather, most autonomous vehicles will be operated in fleets, either owned by private firms or government. An increase in vehicle miles travelled (VMT) is forecast, as both fleet and household autonomous vehicles are used more continuously than current vehicles. Finally, the expectation is that fleet autonomous vehicles will predominately operate with electric or hybrid motors.
These developing changes in transportation have substantial fiscal implications especially for state and local governments – affecting both revenues and expenditures. In the United States at least, these important fiscal implications for subnational governments have not received as much attention as the technological issues concerning the development of autonomous vehicles and the limitations of public acceptance.
Three papers addressing the fiscal implications
A recent Forum in the National Tax Journal provided an introduction to research that is just beginning to address these fiscal issues. Bill Fox examines revenue effects for state governments, Ben Clark considers the potential for solid waste collection, and I examine the broad implications for subnational government expenditures.
Examples of key findings show the substantial importance of these fiscal issues. For instance, Fox reports simulations for six states that estimate that revenue reductions for different scenarios of autonomous vehicle expansion. The results are reductions of between 2 and 9 per cent of total revenues and 60 per cent or more of transportation revenues once autonomous vehicles are fully adopted. My work suggests that among US local governments, county governments may be those most exposed, as about 60 per cent of county budgets have the potential to be affected as autonomous vehicles and ride-sharing fleets expand. These potential effects span the common county public service areas of highways, police protection and corrections, the judicial system, health and hospitals, and public welfare, among others.
Governments should plan in advance
Perhaps even more important than the estimates of future effects are suggestions for what governments should be doing now. Advance planning on the part of national governments, as well as states and localities, clearly seems warranted. Fox argues that states have an opportunity now to reform their tax structures, perhaps to include levying a sales tax or value added tax on mobility, instituting a tax based on vehicle miles, and structuring congestion charges. Regarding expenditures, governments might be cautious about acquiring new parking and transit facilities, (services for which there may be substantial change sooner than the useful life or financing term) and plan construction work to create flexible road infrastructure that can be adapted easily. Clark argues that autonomous vehicle technology offers the opportunity for substantial efficiency gains in public service delivery with planning and new equipment.
In terms of planning for this future, Australia seems ahead of the United States (at least from afar). The Transport and Infrastructure Council under the Council of Australian Governments is overseeing collaborative planning involving the national, state, territory, and local governments. In contrast, less than half of major cities in the United States are preparing for autonomous vehicles in their long-range transportation planning (and even fewer small cities). State governments are adopting regulations regarding autonomous vehicles, but the coverage and breadth varies substantially. Intergovernmental coordination largely is lacking.
One hopes the work reported in the National Tax Journal’s Forum will not only stimulate additional policy research, but also encourage the necessary additional coordinated planning by government. As I noted in my paper, ‘Although vehicles may become self-driving, public policy surely will not.’
Further reading
Clark, Benjamin Y. (2020), The Impacts of Autonomous Vehicles on Local Government Budgeting and Finance: Case of Solid Waste Collection , National Tax Journal, 73:1, pp. 259-282.
Fisher, Ronald C. (2020), Governmental Expenditure Implications of Autonomous Vehicles, National Tax Journal, 73:1, pp. 235-258.
Fox, William F. Fox (2020), The Influence of Autonomous Vehicles on State Tax Revenues , National Tax Journal, 73:1, pp. 199-234.
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