How Autonomous Vehicles May Impact State Revenue

Pew-supported study predicts their adoption will lower collections from sales and fuel taxes

Navigate to:

How Autonomous Vehicles May Impact State Revenue

States draw a substantial portion of their tax revenue from motor vehicles. These revenues include gas taxes, registration fees, and sales taxes on vehicle purchases. If autonomous vehicles (AVs) are widely adopted, the economic and fiscal effects on states will be substantial. 

In this white paper for The Pew Charitable Trusts, William F. Fox, professor of economics at the University of Tennessee, Knoxville, predicts how state revenue will be affected by the adoption of autonomous vehicles. This analysis considers four scenarios, each marked by differing time frames for AV adoption and effects on overall vehicle numbers, and estimates their revenue effects in six states: California, New Hampshire, New York, Ohio, Tennessee, and Texas.

In each scenario presented in the paper, the increased use of AVs reduces future state revenue. Much of this decline is tied to Fox’s expectation that AVs will be electrically powered, causing a drop in fuel tax revenue. Revenue from sales taxes and vehicle registration fees is also forecast to decline due to reduced car ownership and wider use of AV fleets and ride-sharing services. In the most extreme scenario presented in the paper in which AVs are fully adopted by 2040 and overall vehicle numbers are cut in half—state revenue losses would range from 2 percent to just under 10 percent in the six states examined. Scenarios with longer time frames for adoption and lower reductions in vehicle numbers reduce revenue by less.

To offset these potential drops in state revenue, policymakers could levy vehicle-mile taxes, congestion charges, or taxes on transportation services such as ride-sharing companies. States may also need to consider how a shift toward AVs may affect employment in automotive and related industries, thereby affecting personal income tax receipts. By anticipating how future technologies could affect state budgets over the long term, states can proactively prepare.

America’s Overdose Crisis
America’s Overdose Crisis

America’s Overdose Crisis

Sign up for our five-email course explaining the overdose crisis in America, the state of treatment access, and ways to improve care

Sign up
Quick View

America’s Overdose Crisis

Sign up for our five-email course explaining the overdose crisis in America, the state of treatment access, and ways to improve care

Sign up
Article

37 Scientists Pioneering the Future of Biomedical Research

Quick View
Article

Biomedical researchers are at the heart of nearly every medical advancement. From cutting-edge cancer treatments to breakthrough discoveries about emerging viruses, these scientists use creativity and ingenuity to explore new horizons in human health and medicine. And for nearly 40 years, The Pew Charitable Trusts has supported more than 1,000 early-career researchers committed to this work.

Composite image of modern city network communication concept

Learn the Basics of Broadband from Our Limited Series

Sign up for our four-week email course on Broadband Basics

Quick View

How does broadband internet reach our homes, phones, and tablets? What kind of infrastructure connects us all together? What are the major barriers to broadband access for American communities?