The Worry

Both state and federal infrastructure funds come from gas taxes that conventional car drivers pay at the pump. Electric cars never need to fill up. Does that mean they get to use the roads for free? Will gas car drivers be forced to subsidize electric cars?

The Truth

In fact, many states have implemented taxes and registration fees specifically to ensure electric vehicle owners contribute to highway funding. The issue has become a popular talking point, with politicians and others claiming these fees guarantee all drivers contribute equitably to infrastructure funding. However, a closer look at the electric and hybrid vehicle fees reveals the additional charges exceed what drivers typically pay in gas taxes. Drivers are being punished for choosing a cleaner energy alternative. Blaming electric cars for a lack of highway funding is a smokescreen intended to cover a problem decades in the making, a problem taxing electric cars cannot fix.

Thirty-three states levy additional fees for electric vehicles, usually in the form of an additional yearly registration fee. The fees vary state to state, with some states increasing the fees over time. Proponents claim the fees ensure all drivers pay to use and repair America’s roadways.

States with Fees on Electric Vehicles:

• Alabama - Annual fees of $265-$273
• Arkansas - Annual fees of $217, $225 or $230 depending on weight
• California - Annual fees of $153, yearly increase in accordance with the consumer price index
• Colorado - Annual fees of $50
• Georgia - Annual fees of $232.78 for noncommercial alternative fueled passenger vehicles
• Hawaii - Annual fees of $95
• Idaho - Annual fees of $209, $197 or $185 depending on vehicle age
• Illinois - Annual fees of $251
• Indiana - Annual fees of $186.35
• Iowa - Annual fees of $130
• Kansas - $100 total annual registration fee
• Kentucky - Annual fees of $131.50
• Louisiana - Fees of at least $198.50
• Michigan - $135 additional annual fee for BEVs up to 8,000 pounds, $235 additional annual fee for BEVs over 8,000 pounds
• Minnesota - Annual fees of $85 in addition to 1.25% of the vehicle’s base value
• Mississippi - Annual fees of $165
• Missouri - Annual fees of $93.25 up to $126.25, depending on the vehicle’s taxable horsepower
• Nebraska - Annual fees of $90
• North Carolina - Annual fees of $166
• North Dakota - Annual fees of $213, which varies depending on vehicle weight and year of registration
• Ohio - Annual fees of $231
• Oklahoma - Total fees for most passenger EVs would be $206
• Oregon - Annual fees of $153
• South Carolina - Biennial fees of $156-$160
• South Dakota - For non-commercial vehicles, total fees would range from $86 - $194
• Tennessee - Annual fees of $123.75
• Texas - $400 to register a new EVs, $200 annual fee thereafter
• Utah - Annual fees of $164
• Virginia - Annual fees of $104.75 or $109.75 depending on vehicle weight
• Washington - $255
• West Virginia - Annual fees of $251.50
• Wisconsin - Annual fees of $185
• Wyoming - $200 total annual fee

Nineteen states have additional fees on hybrid vehicles.

States with Fees on Hybrid Vehicles:

• Alabama - Annual fees of $165-$173
• Arkansas - Annual fees of $117, $125 or $130 depending on weight
• Idaho - Annual fees of $144, $132 or $129 depending on vehicle age
• Indiana - Annual fees of $86.35
• Iowa - Annual fees of $65
• Kansas - $50 total annual registration fee
• Kentucky - Annual fees of $71.50
• Louisiana - Fees of at least $148.50
• Michigan - $47.50 additional annual fee for certain PHEVs up to 8,000 pounds, $117.50 additional annual fee for certain PHEVs over 8,000 pounds
• Mississippi - Annual fees of $90
• Missouri - Annual fees of $55.75 up to $88.75, depending on the vehicle’s horsepower
• North Dakota - Annual fees of $143, which varies depending on vehicle weight and year of registration
• Ohio - Annual fees of $131
• Oklahoma - Total fees for most passenger PHEVs would be $178
• South Carolina - Biennial fees of $96-$100
• Utah - Annual fees of $64 - $96
• Washington - $180 for non-plug-in hybrids, $255 for plug-in hybrid vehicles with an all-electric range over 30 miles
• West Virginia - Annual fees of $151.50
• Wisconsin - Annual fees of $160

The Fees are Bigger in Texas, Too

Texas became the most recent state to enact an electric vehicle tax. Governor Abbott signed the bill, SB 505, on May 13th, with the law going into effect on September 1st. Supporters of the new tax claim it is a step toward fairness. The bill’s author, Sen. Robert Nichols said, “This cost adjustment equalizes road use consumption between electric vehicles and gas-powered vehicles.” EV advocates say otherwise. Consumer Reports strongly opposed the bill, calling it “punitive.” A study from several Texas state agencies concluded a registration fee of $100 would be equivalent to the fuel tax paid by conventional vehicles. Consumer Reports determined the highest justifiable fee for Texas EV drivers is a mere $71. 

Kara Kockelman, a transportation engineering professor at the University of Texas at Austin, said Texas is clearly falling behind on environmental protections and "fully behind oil and gas." 

“And so, that’s embarrassing,” Kockelman said, “I think, for all of us.”

If states and the federal government want to meet their short-term and long-term climate and energy goals, they’ll need to electrify transportation. The harsh fees many states are enacting are more likely to incentivize gas cars and discourage the adoption of EVs, increasing emissions. In addition, fixed flat fees do not account for miles driven and collecting the taxes as a lump sum is especially burdensome to low-income drivers. What’s more, these electric vehicle fees will only generate an average of 0.04% of state highway funding.

Still, some claim these electric vehicle fees are necessary to fund state infrastructure. Sen. Gary Romine of Missouri said, “These fees would be a way for electric car owners to pay their fair share for maintaining the roads and bridges in the state. We're not trying to penalize the electric car owner." Nicolas Loris, a Heritage Foundation economist said, "The federal gas tax is intended to pay for the cost and maintaining the highway system. It is literally highway robbery that EV owners don't pay into the system."

Gas Taxes: The History

But how effective is that system to begin with? Gas taxes have existed in the U.S. since 1919. The taxes were designed to cover the cost of building and maintaining roads, bridges, and tunnels. The more someone drove, the more fuel they purchased, and the gas tax would allow them to contribute proportionally to infrastructure funding. Unfortunately, those fuel taxes did not account for decades of improving fuel efficiency, nor have they kept up with rising costs and inflation. The federal gas tax hasn’t changed in 30 years. All of that means that the federal fund, the Highway Trust Fund, is failing and is on track to be insolvent by 2028. 

Revenues from taxes on gasoline and diesel have been insufficient to cover spending since 2008 - far before electric vehicles were a plausible culprit.

In April 2021, the Congressional Budget Office estimated the cumulative shortfalls in the Highway Trust Fund’s accounts from 2022 to 2031 would total $195 billion. The bipartisan Infrastructure Investment and Jobs Act, though it heralds many positive changes throughout the U.S., increases the stress: if revenue and spending remain the same, the Fund’s shortfall by 2031 rises to $215 billion. Congress has been delaying the inevitable, transferring more than $150 billion from general revenues into the fund to keep it afloat, but lawmakers seem to lack the political will to make significant changes. Sen. John Cornyn of Texas said, “The current state of the Highway Trust Fund is unsustainable and unless something changes we’re going to be in dire straits—even more dire in just a few years.”

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Electric cars are not the problem

Electric cars are not responsible for the existing shortfall in infrastructure funding. Creating additional taxes and fees for electric vehicles will barely make a dent in the problem and will actively discourage the adoption of clean vehicles. New solutions are needed if we want an abundant and equitable source of funding for America’s highways. 

Fortunately, there are many alternatives to the current gas tax that would generate enough revenue to revamp our crumbling roadways: 

• The most straightforward option is to simply increase the federal gas tax from $0.18 per gallon to $0.33 per gallon, which would generate about $185 billion. 
• There are proposals to tax public EV charging stations, but such taxes would miss out on revenue from EV drivers who primarily charge at home. 
• Another option that accounts for the continuing shift to electric would be a Vehicle Miles Traveled (VMT) tax, which would tax all types of vehicles based on how much they were driven. Several states are now considering VMT taxes or launching pilot programs to gauge their efficacy. However, tracking drivers’ mileage and road use raises significant privacy concerns and collecting taxes for the 263 million registered vehicles in the U.S. would be more complicated and resource intensive than the current system of collecting gas taxes from 600 fuel distributors. 
• An alternative could be a “beneficiary pays” system that collects revenue from people who benefit from the transportation system but do not currently contribute to its funding. For example, people who get packages delivered or use ride-sharing apps implicitly rely on functional roadways but do not currently pay for them. Such a tax might look like a surcharge on these sorts of commercial activities, and would be a cost built into the purchase price. 

If all those options prove unpopular with the general public, the federal government could take a measure supported by nearly 75% of Americans: implementing a carbon tax. Replacing the gas tax with a $20 per ton carbon tax would rake in about $300 billion, more than enough to replenish the Highway Trust Fund.

The United States has some of the best infrastructure in the world, but there is room for improvement. Everyone who benefits from our transportation system should contribute to its funding and maintenance. Electric car owners have a responsibility to pay their fair share for road use, but they shouldn’t be punished for choosing a clean energy vehicle. EV owners in many states are paying exorbitant fees, far beyond what conventional car owners pay in gas taxes. The gas tax system itself is failing to keep up with our infrastructure needs. We need a bold, new solution for infrastructure funding that is both equitable and helps us achieve our climate goals.

Don’t let anyone tell you EVs are the problem. EV drivers pay road taxes, too.