One of the quickest-growing divides between states is their response to electric vehicles, which are accelerating in popularity across the country.
Some states are offering incentives for people to buy EVs with the goal of reducing carbon emissions, while others are boosting fees on them to help offset the loss of gas tax revenues. A few are doing both.
The split falls neatly between red and blue states. The Democratic-led states are leading the way on EV incentives, while Republican-controlled states are increasingly targeting EVs for higher fees since they ply the roads without paying gas taxes. But all are preparing for the percentage of EVs on the road to only increase.
New Mexico Gov. Michelle Lujan Grisham (D) this month became the latest governor to embrace EV incentives. Speaking at a future of transportation symposium in Albuquerque, Grisham announced that she will push state lawmakers to fund an EV tax credit program during the 2024 legislative session.
“The fact of the matter is that consumers and dealers want better access to electric vehicles,” Grisham said in a statement.
Grisham previously announced that New Mexico would require 82% of new vehicles sold in the state be zero-emission by 2031. Multiple states have adopted or are in the process of adopting California’s clean car standards, which call for phasing-out the sale of gas-powered vehicles by 2035.
If New Mexico lawmakers agree to the EV incentive, the state will join more than a dozen others that offer, or will soon offer, rebates for people who purchase battery-powered cars.
Other states with incentives to buy EVs include Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania and Vermont. Virginia also has a rebate program but it has never been funded. Oregon’s Clean Vehicle Rebate Program ran out of money in May and has yet to be replenished.
The list also includes Minnesota, where state lawmakers earlier this year approved a new $2,500 rebate for EV purchases, which could be paired with a federal $7,500 EV tax credit included in the Inflation Reduction Act.
California offers rebates of up to $9,500 depending on income. Maine’s rebates that top out at $7,500 and Colorado at $5,000. Washington State exempts the first $15,000 in value of the vehicle from the state sales tax.
California, Oregon and Washington, along with Washington, D.C., lead the nation in EV and hybrid EV adoption, according to insurify.com. A quarter of new cars sold in California are EVs, and the state has exceeded its year-over-year target for EV car and truck sales.
“We’ve provided the incentives, goals, and infrastructure to get us here and continue this progress for decades to come,” Gov. Gavin Newsom (D) said in a recent statement announcing that 7.5% of new trucks sold last year were zero-emission vehicles.
Still, the loss of gas tax revenue continues to confound states. A leading alternative, which is being road-tested in several states, is a vehicle-miles-traveled fee. In the meantime, states are increasingly looking to higher registration fees for EVs.
Tennessee is on track to have the highest EV registration fee in the country — $274 by 2026 — after lawmakers this year approved a phased-in increase that aims to charge EV drivers what the average driver currently pays in gas taxes.
“What we recognize is that our current system of charging people for how we fund our road system is unsustainable because, when you think about it, we all know that we’re moving more and more toward electric vehicles,” Butch Eley, Tennessee’s Department of Transportation commissioner, told WBIR-TV in August.
In Texas, where EVs are less than 1% of vehicles, lawmakers this year enacted a $200-a-year registration fee in addition to the regular car registration fee. Supporters argue it is a fair replacement for not paying gas taxes, but opponents say the fee could serve as a disincentive for drivers to make the transition to zero-emission cars.
“We urgently need to get more electric vehicles on the road,” Luke Metzger, executive director of Environment Texas, told the Texas Tribune in August. “Any increased fee could create an additional barrier for Texans, and particularly more moderate- to low-income Texans, to make that transition.”
But it is not just Republican-led states that are making EV drivers pay. More than half of states assess special fees for EVs, according to the National Conference of State Legislature.
Washington State, a leader in EV adoption, charges EV owners $150 a year plus another $75 to help pay for electrification infrastructure. In 2020, Consumer Reports calculated that any fee over $127 in Washington could not be justified based on the average amount drivers pay in state fuel taxes.
Other states with EV fees over $200 include Alabama, Arkansas, Georgia, Ohio, West Virginia and Wyoming, according to Money.com.
Pennsylvania lawmakers this year considered imposing a $290 annual fee on electric vehicles. Florida Sen. Ed Hooper (R) recently told the Washington Post that he plans to reintroduce legislation next year to establish a $200 annual EV registration fee in his state.
“We use gas taxes to build and maintain our roads, and those that are buying EVs are getting a free ride,” Hooper told the newspaper.
Red states are finding other ways to capture revenue from EV drivers. Georgia, Iowa, Kentucky, Montana, Oklahoma and Utah have enacted taxes on EV charging, according to NCSL and the Tax Foundation.
Tor Larson, vice president at CALSTART, a nonprofit focused on the shift to zero-emissions transportation, said both incentivizing and charging EV drivers is not inherently contradictory.
“We’re incentivizing the purchase because EVs are more expensive to buy,” Larson said. “[But] you’re driving the same roads so there has to be an equalization because the money has to come from somewhere.”
One other way states are juicing the shift to zero-emission transportation is by converting government vehicles. In New Mexico, Grisham paired her EV incentives announcement with an executive order that directs state agencies to convert their fleets to EVs by 2035 to “make sure the state is ‘walking the walk.’”
In Georgia, where Gov. Brian Kemp (R) has pledged to make his state the “electric mobility capital of America,” Rep. Becky Evans (D) recently announced plans to introduce legislation in 2024 to incentivize state and local governments to convert their fleets to electric.
“Electric vehicles are more expensive up front, but the maintenance costs are less,” Evans told Capitol Beat News Service.
Evans’s proposal is modeled on a 2022 Virginia law aimed at speeding the conversion to government EVs by allowing public agencies to consider the lifetime operational costs of a vehicle, not just the sticker price. Florida lawmakers passed a similar bill this year on nearly unanimous votes, but Gov. Ron DeSantis (R) vetoed it without explanation.
California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New York, Oregon, Pennsylvania, Vermont and Washington are among other states that have EV fleet goals or requirements, according to NCSL. Several states have also set targets for converting to zero-emission public transit and school buses.
A study this year by the Arizona PIRG Education Fund and Frontier Group concluded state and local governments nationally could save $11 billion in lifetime costs by converting public fleets to electric over the next decade.