Don't Mess With Taxes

Electric vehicle charging in a suburban Austin, Texas, garage. Texas in 2023 joined the growing ranks of states that collect a special registration fee from EV drivers. (Photo by Kay Bell)

A federal fee of $250 a year for electric vehicle owners is part of the transportation component of the Republican budget reconciliation bill.

The new revenue would supplement the Highway Trust Fund, which currently is primarily funded by traditional fuel excise taxes which are added to pump prices.

The financial requirement would ensure that electric vehicles (EVs) “begin paying for their use of the highway system just like other highway users,” noted Rep. Sam Graves (R-Missouri), chair of the House Transportation and Infrastructure Committee in a statement accompanying the release of the panel’s proposal.

As promised by Republicans when they took control of Congress this session, the transportation funding takes aim at “wasteful Green New Deal style spending from the [Biden administration’s] Inflation Reduction Act.”

The new user fees provision, added Graves, “addresses the broken Highway Trust Fund revenue stream in a substantial manner for the first time in over 30 years.”

Following markup today (Wednesday, April 30), the committee approved by a 36-30 party-line vote a proposal with the new $250 annual fee on electric cars. The measure also calls for a $100 yearly charge to owners of hybrid vehicles.

However, transportation committee members dropped a proposed annual $20 federal registration fee on all vehicles starting in 2031 to fund road repairs.

Removal of the lower universal vehicle fee, and upping the EV levy from $200 to $250, is estimated to provide $12.5 billion over 10 years, a drop from the original proposal’s original $15 billion decade amount projection.

EVs cut into gas tax collection: The move by Uncle Sam to charge electric and alternative fuel vehicle owners follows a trend that’s been spreading at the state level.

As more EVs hit the highways, lawmakers across the country have seen their fuel excise tax collections drop, since EV drivers don’t pay the gas or diesel excise taxes added to the price paid by users of traditional fuel pumps.

The loss of this revenue has left states struggling to replace the lost revenue need to meet highway and associated infrastructure maintenance needs. Many have enacted higher registration fees for EVs.

Currently, 39 states assess electric vehicle registration fees, and 28 states also collect fees on hybrids.

The same problem is plaguing transportation projects at the federal level, especially since the national gasoline tax has been stuck at 8.4 cents per gallon (cpg) since Oct. 1, 1993, and is not indexed for inflation. The federal tax rate for diesel is 24.4 cpg.

“I don’t want to lose sight of the fact that we accomplished something historical by bringing in new dollars in the Highway Trust Fund with the fee on hybrids, fee on electric vehicles,” said Graves in an interview after the markup. “My intent is to do away with the fuel tax and go to something different. So I’m glad we started that process.”

As for the environmental provisions advocated by the previous administration, the proposal now heading to the full, GOP-controlled House would rescind unobligated funds for low-emission aviation technology, neighborhood equity grants, low-carbon material for federal building assistance, environmental review implementation and low-carbon transportation material grants.

You also might find these items of interest:

• How your state pays for its roads
• When did your state adopt its gasoline tax?
• Want an EV? Buy before Trump eliminates the tax credit

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