Electric vehicles targeted for new fees, taxes

They are looking to make up for the loss in gas taxes caused by the rise in EV and hybrid sales.
New cars charge outside a Tesla dealership in Littleton, Colo. (AP Photo/David Zalubowski)

Lawmakers in multiple states are targeting electric and hybrid vehicles for new or higher fees to help offset gas tax revenues lost from the rise in their sales.

Annual registration fees, vehicle miles driven charges and taxes on public EV charging stations are all in the mix as state legislative sessions rev up.

States have long relied on gas taxes as a key source of transportation funding. But the arrival of EVs along with much more fuel efficient gasoline-powered cars is threatening that revenue source.

“Right now, they’re getting a free ride,” Montana Rep. Denley Loge (R), the sponsor of an EV fee bill, said in a recent floor speech.

According to tracking by the National Conference of State Legislatures, 32 states have already enacted fees on plug-in electric vehicles. Most of those states also charge plug-in hybrid owners. In 2019, a record 10 states imposed or increased fees on EVs.

Another handful of states is poised to act this year despite concerns from some EV advocates that fees are a disincentive for drivers to switch to electric cars.

Montana is among the states advancing EV fee legislation. Gov. Greg Gianforte (R) vetoed a bill in 2021 that would have established a $195 a year fee on electric cars and a $375 a year fee on electric trucks. Gianforte said the fees were too high and would make Montana an outlier.

Under this year’s revised proposal, Montana would impose a $130 annual registration fee on electric cars and a $70 fee on hybrids. The fees would go up on a sliding scale based on the weight of the vehicle with a top range of $1,100 a year for all-electric trucks weighing more than 26,000 pounds. The proceeds would go into the state’s highway account.

The bill cleared the state House last month on a nearly unanimous vote.

Loge said he came up with the new fee schedule using a formula that considered the state’s gas tax rate, the average number of miles a Montana driver puts on their vehicle annually and the average gas mileage for a vehicle in each weight class.

“It’s a way that they pay actually the road use fee and pay for our roads,” Loge said in his floor speech.

The renewed focus on making EV drivers pay comes amid a rapid acceleration of electric car sales, which jumped 65% in 2022, according to Kelley Blue Book. EVs now account for nearly 6% of new vehicle sales. By 2040, they are expected to represent more than half of U.S. passenger car sales.

Florida lawmakers are weighing whether to impose a fee on EVs after earlier proposals faltered. The Senate Transportation Committee was briefed on the issue last month.

Other states are considering hikes in existing EV fees. Tennessee EV owners pay a $100-a-year registration fee, but Gov. Bill Lee (R) has proposed triping that. Lee’s transportation commissioner, Butch Eley, said last month that the goal is to align the EV fee with the state’s existing 27-cents-per-gallon gas tax.

“We’re looking at ways that we can create parity between what a combustion engine pays now in gas tax and what our electric vehicles will pay in the future,” Eley said last month.

In Michigan, where EV owners currently pay a $140 annual fee, a recent study projected that by 2030 the state could lose $95 million a year in gas tax revenues. Gov. Gretchen Whitmer (D), who has backed incentives for EV purchases, recently indicated an openness to increasing fees on EVs and, down the road, charging EVs per mile.

“I believe that it’s important for us to have a sustainable revenue source because our roads and bridges have been underfunded for decades,” Whitmer told WLNS TV in December.

Per-mile charges, also known as vehicle miles traveled fees, is a concept that more states are road-testing as a replacement for the gas tax. As of last April, more than a dozen states and regions had received federal grants to test alternatives such as road usage charges, according to the NCSL.

Oregon debuted a pay-per-mile pilot in 2015. In Utah, electric vehicle owners now have the option of paying a $130.25 annual flat fee or enrolling in the state’s Road Usage Charge program, which charges a penny per mile. Last year, Virginia launched an optional per-mile fee program for EVs and more efficient gas-powered cars.

Another idea that is quickly catching on — and represents a new, emerging trend — is to mimic the gas tax by taxing EV owners to charge up their cars.

Since 2021, Iowa, Kentucky, Oklahoma and Pennsylvania have all enacted per-kilowatt hour taxes on public charging stations, according to NCSL.

“A main driver of this is an effort to find a revenue stream analogous to motor fuel taxes,” Austin Igleheart, an NCSL policy specialist wrote in an email.

This year, Igleheart said, similar bills have been introduced in Kansas, Mississippi, Montana, Nebraska and Wyoming, while feasibility studies are either underway or being contemplated in Vermont and North Dakota. The idea is also under consideration in Georgia.

The sponsor of the Wyoming bill, state Rep. Landon Brown (R), told Pluribus News his bill won’t advance this session but that the issue will be a topic of discussion during the legislative interim.

“The per kilowatt charge seems to be one of the fairest ways to track how we charge the usage of our roads of the electric vehicles,” Brown said. “The other option we have is through a road usage charge, but that idea is not popular in Wyoming and I doubt we see that come to fruition.”

The push to create parity between what EV drivers and non-EV drivers pay has sparked concern among some EV advocates.

“At a moment that we are working to move toward electric vehicles … we should not be charging EVs as much or more than we are charging gas-powered vehicles,” said Tony Dutzik, associate director of Frontier Group, which is part of the progressive Public Interest Network.

Dutzik said higher fees on EVs could serve as a disincentive for people to transition to a battery-fueled car. He also argued that the gasoline powered cars are currently subsidized because they are not charged for their “pollution impacts.”

“If we were in a world where we were rolling-in all costs into the cost of driving, then probably it would make sense for EVs to pay a fee,” Dutzik said.

The drive to make EV drivers pay more comes even as the federal government, multiple states and utility providers offer tax incentives or rebates for people to switch to electric cars.

Blue states such as California, New York, Oregon, Vermont and Washington have gone even further by mandating a phase-out of the sale of combustion engine vehicles by 2035. That list of states is likely to grow.

In response, a group of Republican lawmakers in deep red Wyoming recently poked back with what one lawmaker called a “tongue-in cheek” resolution, which is now dead, calling for a ban on the sale of EVs in the Cowboy State by 2035.

“We just wanted to make a statement that there is a counter to stopping selling gas vehicles in other states,” state Sen. Jim Anderson (R) told the Casper Star Tribune.