Don't Mess With Taxes

Reviewed and updated Aug. 22, 2023

Owners of electric vehicles in Texas, like this one charging in a suburban Austin office garage, will face a new registration fee starting Sept. 1, 2023. (Photo by Kay Bell)

More than 10 million electric cars were sold worldwide in 2022. Sales are expected to grow by another 35 percent this year, meaning 14 million electric vehicles (EVs) will be on global roads last year, according to the International Energy Agency's (IEA) latest annual analysis.

That puts electric autos' share of the overall car market at 14 percent in 2022, a 10 percent increase from just two years ago. IEA projects EV market share will increase to 18 percent this year.

The United States is part of the surge. New EV vehicle registrations numbered 756,534 in 2022, a 57 percent increase, according to Experian data cited by Automotive News.

EVs cost states transportation money: Growing EV popularity is good news for those looking to reduce reliance on fossil fuels. However, it's bad news for states who rely on gasoline excise taxes.

States typically use the fuel taxes to pay for road maintenance and construction. That revenue already had taken a hit as gas-fueled autos became more fuel efficient. EVs, whose owners bypass local gas stations, cost states even more.

To recover some of this lost gas tax revenue, 32 states collect some type of EV fee. On Sept. 1, Texas will make it 33.

National Conference of State Legislatures (NCLS) data shows annual EV fees range from $50 in Colorado, South Dakota, and Hawaii to $225 in Washington.

Of the states collecting EV registration fees, 19 also assess a fee on plug-in hybrid vehicles. These fees are typically in addition to traditional motor vehicle registration fees. Ten states — Alabama, Arkansas, Hawaii, Illinois, Iowa, Kansas, North Dakota, Ohio, Washington, and Wyoming — also enacted laws in 2019 amending or adding new fees for plug-in electric and some plug-in hybrid vehicles.

More than registration fees: The NCSL also reports that in addition to special EV registration fees, in recent years at least 19 states considered 34 pieces of legislation addressing road user charges (RUCs). Of those, at least seven states — Maine, Nevada, New Mexico, Oregon, Utah, Virginia, and Washington — enacted eight new laws.

These charges, dubbed Vehicle Miles Traveled (VMT) fees or Mileage-Based User Fees (MBUF), seek to more closely link transportation taxes to the actual use of the roadways by a driver, as compared to traditional fuel taxes.

Texas' new EV tax: The new Lone Star State law will require buyers of EVs to pay $400 to register their new vehicle on top of other state taxes and fees. Registration renewal would cost $200.

Texas has nearly 200,000 electric vehicles in the state, with more than 30,000 new EVs added to the roads so far this year, according to data from the Dallas-Fort Worth Clean Cities Coalition.

The fee will not apply to hybrids, since they use some gasoline and drivers pay the state's 20-cents-per-gallon gas tax when they do fill up the vehicles. Electric motorcycles, mopeds, and autocycles also are exempt from the new EV charge.

The Texas Comptroller's office estimates that when the new EV charge kicks in on Sept. 1, it will mean at least $38 million in new money for the state highway fund. Gasoline and diesel taxes will generate an estimated $3.8 billion in revenue for the state in 2024, according to the comptroller's office. 

The Lone Star State also will get a boost from new EV buyers. Those who purchase a new electric auto must pay two years of registration, or $400, up front. 

"This is extremely important to make sure people are paying their fair share and that we have adequate funding for the preservation and maintenance of our highways in the future," said state House Rep. Terry Canales, an Edinburgh Democrat, when that chamber debated the bill in April.

The Texas Electric Transportation Resources Alliance, an advocacy group for adoption of electric vehicles, officially was neutral on the EV registration fee. However, Tom Smith, the group's executive director, said he would have preferred to see a mileage-based fee.

"The more you drive in Texas, the more you pay [in gasoline excise tax]," Smith told the Austin American-Statesman. "Those people who drive less pay less than the average for the average driver that's calculated based on what you pay at the gas pump."

Speediest EV: Check out my tumblr blog Tumbling Taxes' May 21, 2023, post on the fastest electric vehicle on the road (for now). The Rimac Nevara, an all-electric two-seater sports car designed and manufactured by the Croatian automotive manufacturer Rimac Automobili, recently smashed 23 Performance World Records. But most of us will never be able to drive the hypercar, which has limited production runs and costs north of 2 million euros.

You also might find these items of interest:

• When did your state adopt its gasoline tax?
• Electric vehicle tax credits favor the wealthy
• 2 federal projects announced to improve EV charging options
• Good EV tax credit news for used Teslas, EV lobbying by Vietnamese automaker
• EV buyers prefer rebates to tax credit; switch could save Uncle Sam money, too

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