As electric vehicle (EV) usage grows throughout the United governments, governments have a fundamental finance challenge: how to replace the billions of dollars earned by gasoline taxes, which have historically subsidized infrastructure and road maintenance. Because EVs do not consume gasoline, their owners do not pay to these taxes, prompting governments to consider alternate revenue methods, most notably increased EV registration costs.
For decades, fuel taxes have provided the principal financing for road repairs and infrastructure projects. In 2022, the federal gas tax produced around $36 billion, with state fuel taxes contributing billions more. However, as EVs gain popularity, this financing paradigm is being undermined.
According to the Bureau of Labor Statistics, EVs now account for around 10% of new car salesand might account for up to 40% of all cars by 2030. This represents a considerable number of drivers who are no longer paying to road maintenance via petrol taxes, causing several jurisdictions to levy additional EV-specific costs.
"We have to think long-term about how we're going to maintain our roads," said Susan Howard, director of policy and government relations at the American Association of State Highway and Transportation Officials (AASHTO)."As gas tax revenues decline, we need a sustainable alternative that ensures fairness for all drivers."
So far, 39 states have increased yearly registration rates for EVs, ranging from $50 to more than $250 per year.
According to NCSL , several states are addressing the problem as follows:
● Georgia charges non-commercial EV owners $200 and business EV owners $300 yearly.
● Indiana increased the yearly EV cost to $221 in 2023 to offset dwindling gas tax income. Hybrid costs rose to $74.
● Texas charges a $400 yearly cost for newly registered electric cars and a $200 fee for future years.
● In Utah , EVs and cars powered by sources other than gasoline, diesel, natural gas, or propane are subject to an extra yearly tax of $138.50. Plug-in hybrid EVs are also subject to an extra yearly cost of $60.25, while hybrid EVs are charged $23.25.
● Ohio charges yearly fees of $200 for battery electric cars, $150 for plug-in hybrids, and $100 for standard hybrids.
● West Virginia charges a $200 yearly tax for EVs and $100 for hybrid cars.
● In Wyoming owners of plug-in electric vehicles pay a $200 yearly flat tax.
● Missouri levies a $120 yearly fuel decal tax for alternative-fueled passenger cars weighing up to 18,000 lbs and a $60 cost for plug-in electric hybrid vehicles.
●In Illinois, electric car registration costs a fixed $100 per year.
● Kentucky will charge a $120 registration fee for electric cars and a $60 tax for hybrid autos starting January 2024.
● Kansas requires an annual registration charge of $100 for all-electric vehicles and $50 for electric hybrids and plug-in hybrids. North Carolina has a yearly registration cost of $180 for electric cars and $90 for plug-in hybrids.
● In Alabama , electric car owners must pay a $200 yearly registration charge and an extra $100 for plug-in hybrid vehicles.
Oklahoma employs one of the more innovative ideas, charging EV users based on the weight of their vehicle:
● Less than 6000 pounds (Class 1): $110
● 6000–10,000 lbs. (Class 2): $158
● 100,000–26000 pounds (Class 3-6): $363
● Class 7-8, over 26,000 pounds, $2250
The yearly charge for plug-in hybrids is based on weight.
● Class 1: Under 6000 lbs. - $82
● Class 2: 6000-10000 lbs. - $118
● Class 3: 10000-26000 lbs. - $272
● Over 26000 pounds (Class 7-8): $1687.
In certain places, these costs may be almost three times what the typical gasoline motorist pays in fuel taxes each year. Critics claim this unjustly penalizes EV owners, while supporters maintain that is a vital step to guarantee that all road users pay equitably.
Consumer and environmental advocacy organizations are concerned that these additional expenses would discourage EV adoption, undermining climate objectives and delaying the transition away from fossil fuels.
"The unintended consequence is that we're taxing the very people who are helping to reduce emissions," said Katherine Garcia, Sierra Club's Clean Transportation for All campaign director. "Instead of imposing high fees, we should be incentivizing clean energy solutions."
At the federal level, President Joe Biden's administration aggressively supported EV tax credits and infrastructure expenditures, with the goal of making electric cars more affordable to middle- and low-income Americans. The Inflation Reduction Act of 2022 included tax credits of up to $7,500 for new EV purchases and $4,000 for qualified used EV purchases, as well as incentives connected to domestic battery manufacture.
However, incumbent President Donald Trump, who is now serving his second non-consecutive term in office, has promised to eliminate numerous EV-related subsidies, claiming that they harm conventional automakers and unjustly benefit firms like as Tesla. His government has also opposed federal regulations on EV production limits, which might have a direct influence on the tax structure of these cars.
Rather of implementing flat fees, some politicians are considering other measures to compensate for lost gas tax income. This includes:
This plan, often known as "road usage charges," would tax drivers based on mileage rather than fuel consumption. States such as Oregon and Utah have pilot projects in place to test this technique.
Certain roadways may charge higher tolls for EVs, ensuring that they pay to road upkeep without discouraging uptake.
Some lawmakers propose mandating automakers to donate a part of their EV sales proceeds to infrastructure upkeep.
The Infrastructure and Projects Authority's chief executive, Nick Smallwood revealed with The Guardian an alternate option: road pricing.
"We must explore how to replace gasoline duty as we transition to electric cars. Road pricing is one idea that might give a long-term answer."
While Smallwood was referring to the United Kingdom, road pricing, which includes tolls, congestion charges, and other taxes, is already employed in the United States. Expanded toll roads, for example, might help governments recuperate money lost due to greater EV use.
As governments continue to adjust their income structures, the fight between EV fees vs. gas taxes will only grow. With EV adoption quickly increasing, a fair and efficient strategy to support infrastructure is critical.
For the time being, EV owners in most states can expect to pay more costs, but the actual amount—and whether it is still fair—will most certainly remain a contentious subject for years.