With More Electric and Hybrid Cars on the Road, States Increase Fees
Critics argue that the revenue raised isn't worth weakening the incentives to buy more environmentally friendly vehicles.
General Motors may have pulled the plug in late November on its award-winning hybrid, the Chevy Volt, but electric vehicles (EVs) are far from dead. While they may only account for little more than 1 percent of all light-duty cars sold in the U.S. today, their share is quickly growing.
EV sales were on pace to top 1.6 million in 2018, up from just a few hundred thousand four years earlier. According to Bloomberg NEF, EV sales are forecasted to hit 11 million in 2025 and then surge to 30 million in 2030 as they become cheaper to make than internal combustion engines. By 2040, 55 percent of all new car sales and 33 percent of the global fleet will be electric.
As EVs become more common on America’s roadways, there are growing concerns that gasoline tax revenues will take a big hit. Those concerns have led some states to impose additional registration fees on electric and hybrid vehicles. In the past three years alone, 14 states have enacted annual fees ranging from $50 to $200. In total, 20 states do so, according to the National Conference of State Legislatures. “It’s an equity conversation,” says Kevin Pula, a senior policy specialist with NCSL’s transportation program. “States are trying to make up for lost gas tax revenue.”
Indeed, proponents of the fees say they create equity among drivers by making them all pay to use the roadways. Only two states -- Mississippi and Utah -- approved a fee in 2018. That’s low compared to 2017, when nine states enacted fees. The dropoff is not surprising, as lawmakers are more likely to raise transportation-related taxes in non-election years. In 2018, only eight or nine states passed major transportation legislation. EV and hybrid registration fees, says Pula, tend to be rolled into such bills.
States With Fees on Hybrid and Electric Vehicles
Twenty states charge fees ranging from $50 to $200. Oklahoma’s fee was struck down by the state Supreme Court last year.
(Source: National Conference of State Legislatures)
But with the midterms in the rearview mirror, more states are expected to take up transportation funding in 2019. Illinois is currently one of 30 states that don’t charge EV and hybrid owners an annual fee. State Rep. Tom Morrison sponsored two failed bills in 2017 to increase registration fees for electric and some hybrid cars. He told the Chicago Daily Herald that he’s committed to reintroducing at least one of those bills, which had bipartisan support, this year.
Critics, meanwhile, argue that lawmakers aren’t looking at the equity conversation in the right way. EVs don’t cause as much wear and tear to roads as gas-powered vehicles, they say, because they are lighter. EVs provide additional benefits, such as emitting zero greenhouse gases. And the revenue from the fees is small and could hurt incentives encouraging adoption. Currently, 34 states provide incentives for certain EV and hybrid cars, including purchase rebates, tax credits, HOV-lane access and free parking.
It’s true that the fees don’t bring in much revenue now. North Carolina, for example, only sees about $12 million to $15 million a year from EV fees -- a drop in the bucket for transportation, says Pula. “But that will change as more electric vehicles are adopted. By 2040, the nation could be losing millions on gasoline revenues. Very quickly we could be in a position where these fees are very important.”