Ben Margot/AP Photo
Tesla electric cars are loaded onto carriers at the Tesla plant in Fremont, California, May 13, 2020.
Last week, Politico reported on a new trend: electric-vehicle owners in Texas getting notices in the mail to pay $200-a-year fees to register their cars. It sounded like a brazen effort to hinder the transition away from fossil fuels in the state that’s the heartland of the oil industry. But there’s a kernel of legitimacy to it, an attempt to wrestle with a legitimate policy problem: How do you deal with a situation where user fees will increasingly not be paid by users?
We fund a lot of infrastructure in this country, particularly transportation infrastructure, through user fees. The federal gas tax feeds into the Highway Trust Fund, which is primarily used to repair and build roads and bridges. States also use gas taxes for transportation infrastructure. Roughly 84 percent of federal highway funds and 29 percent of state funds come from gas taxes.
Electric-vehicle owners do not use gasoline, and so do not pay the gas tax. Yet they still use roads. And in the U.S., most EVs are made with larger frames and are consequently heavier than the average vehicle, meaning that EV owners are effectively more intensive users of those roads.
The EV semi-surge isn’t close to reaching a tipping point. Pre-pandemic, the U.S. used about nine million barrels of oil per day; four years later, we’re at about the same level. Vehicle miles traveled peaked higher four years ago, so this isn’t yet a case of drivers using less gasoline but traveling more miles. Even in the earliest-adopting EV state, California, four out of five cars sold are gas-powered, and that number is more than 19 out of 20 in half the states.
That’s why it’s reasonable to see this rush to levy fees on EV users as an attempt at discouraging EV purchases, particularly in Texas, which has some of the lowest gas taxes in the nation—the rate hasn’t changed in 32 years—and now some of the highest EV fees. A rough estimate shows that Texas’s EV fees come to more than twice the average Texan’s gas taxes. (Though if you add the federal gas tax on top of that, which flows back into state infrastructure repairs, it’s closer.)
But the Biden administration does want to boost EV adoption, with $7,500 consumer rebates for EVs in the Inflation Reduction Act, and investments in charging infrastructure. That consumer rebate dwarfs the registration fees. And the effort appears to be working; between April and June of this year, more EVs were sold than in all of 2019.
Today, the federal Highway Trust Fund doesn’t take in enough revenue to fund transportation needs. So if the trend is for more cars to be on the road that aren’t paying into that fund, there’s at least some basis for concern about a free-rider problem. And there are a lot of theories and options about how to do that. Unfortunately, none of them are entirely promising.
If the trend is for more cars to be on the road that aren’t paying into the federal Highway Trust Fund, there’s at least some basis for concern about a free-rider problem.
According to the National Conference of State Legislatures, 32 states, most of them conservative but even Pacific Coast states like Washington, Oregon, and California, have some form of heightened registration fees for electric vehicles. Nineteen states impose such fees on plug-in hybrids. They range from $50 in Colorado to $225 in Washington state; Oklahoma has a tiered fee based on vehicle weight. Five states index their fees to inflation. So far, these charges aren’t making up for lost gas tax revenue, according to some reports. And a big one-time bill for registration is going to be difficult for poorer residents, when the goal of the EV transition is to make adoption cheaper.
If gas taxes were an attempt to ensure that those who drive the most pay into the road repair fund the most, then the logical step for EVs would seem to be a tax on charging stations. Georgia, Iowa, Kentucky, Montana, Oklahoma, Pennsylvania, and Utah have taken that step, imposing taxes on EV charging that fund state road construction (except for Iowa’s, which goes to statewide economic development).
But a 2021 study from JD Power found that 80 percent of all charging is done at home, meaning that a public charging fee would capture little of the actual charging being done. You could perhaps add a utility levy for home charging, but that would require more knowledge about people’s home electricity usage than utilities currently have, and would also likely spawn ratepayer anger.
States could increase their existing tolls on roads and bridges to increase highway funds. But that would undoubtedly anger drivers as well, particularly because they would be paying more for the same roads, many of them to compensate for a problem of EV purchases that they didn’t create. I don’t see many governors allowing that to happen. Raising the gas tax to make sure it covers highway funding suffers from the same problem.
The idea that seems perfectly fit for our growing surveillance state is a vehicle-miles-traveled tax, which has been discussed for over a decade. The idea is basically that all cars already have an odometer, and that data could be tracked and beamed over to the state governing agency, with taxes then determined from there. Either that or people could fill out mandatory paperwork with their odometer reading to determine the tax.
Oregon and Utah already have vehicle-miles-traveled tax pilot programs for EVs and plug-in hybrids that people can voluntarily opt into instead of paying a special registration fee; a bill to make it mandatory in Oregon recently failed. Both states have complicated formulas to determine how much users pay; Utah charges a per-mile rate up to a flat fee, while Oregon now pegs the fee to a percentage of the state’s gas tax. A California pilot is also voluntary, and refunds gas taxes to those who opt in, and there’s another pilot in Virginia. The federal government also authorized a pilot at the Department of Transportation in the bipartisan infrastructure law in 2021, but it hasn’t been set up yet.
This seems like a recipe for disaster. Virtually stalking drivers on every single vehicle—how exactly are you going to get the device implanted on the hundreds of millions of vehicles already in use?—and extracting pennies per mile is probably the quickest way to inspire a revolt in this country, to say nothing of what would happen if that data were being sold or used for some other purpose. If you’re doing it instead during an annual inspection (which would have to be added in some states), you’re giving people one big charge per year instead of the micropayments they made at the pump. And if you just require people to list their odometer reading during annual re-registration, it would rely on people properly listing their mileage, which would be an enforcement nightmare.
At a time when the far right is already paranoid about both government mandates and government surveillance, throwing in something that combines both would get very ugly, very fast. Policymakers shouldn’t be intimidated into bad policy, but even the less paranoiac among us could react very negatively, and it’s unclear how much benefit you really get for the hassle. When Transportation Secretary Pete Buttigieg randomly mused about vehicle miles traveled in 2021, he had to quickly walk it back. The fact that his agency has dawdled for two years on a pilot is probably no accident. It’s destined to be unpopular.
The truth is that there are a number of unsatisfying options for essentially recreating the gas tax in an EV world. That’s especially true at a time when the climate crisis requires more EV adoption, not more taxes to blunt it. The option nobody wants to actually hear is to raise taxes generally and use them to fund infrastructure. We essentially did this in a roundabout way in the federal infrastructure bill, which didn’t rely solely on user fees but a panoply of (mostly gimmicky) taxes to create a new pot of money for infrastructure.
Registration fees are probably the most inoffensive way to handle this. But if we didn’t have an extreme allergy to taxes in the U.S., there would be more to work with.
