By: DSIRE Insight Team

States rely on gasoline tax revenues in large part to fund transportation infrastructure. Gas taxes serve roughly as a fee on road usage; people that drive more generally buy more gas and therefore pay more in gas taxes. However, this system of allocating road infrastructure expenses has never been perfect, as fuel use is not exactly analogous to the burden that a vehicle places on road infrastructure. States have been facing declining transportation infrastructure funding due both to increasing vehicle fuel efficiency and the fact that gas taxes in many states have not risen with inflation. Increased adoption of electric and other alternative fuel vehicles could exacerbate this issue, as these vehicles do not use gasoline, and therefore their drivers do not pay gas taxes. As states seek to increase electric vehicle (EV) adoption in order to meet decarbonization and other policy goals, they face the challenge of determining a way to recoup transportation infrastructure expenses while still enabling the development of the EV market. States have largely addressed this issue so far by adopting increased registration fees for electric vehicles, but some states are considering other methods.

Registration Fee Increases Through 2019

By the end of 2019, 28 states had adopted increased registration fees for EVs. The amount of these fee increases varies considerably among the states that have adopted them. These increases for EVs range from $50 (in Hawaii) to $225 (in Washington state). Fees proposed in state legislation have been even more varied, ranging from $25 to $1,000. Some fees are determined based on formulae that approximate how much an EV owner would pay in gas taxes if they drove a comparable conventional vehicle, although the specifics of these formulae vary among states.

State Electric Vehicle Registration Fee Increases At the End of 2019

Alternative Methods to Charge for Transportation Infrastructure

While most states have addressed this issue with simple flat-rate fees or fees based on vehicle type, a few states have considered alternative reforms to transportation infrastructure funding mechanisms.

One method is to charge a per-kWh excise tax on electricity supplied by EV charging equipment. This is essentially the same as a gas tax, just charged on electricity. This system is relatively simple to administer, as it can be applied to electricity sales from the utility supplying the electricity, which are already taxed for standard sales tax purposes. However, this does require electricity supplied to EV charging equipment to be metered separately from other electricity consumption.

Another method is a charge on vehicle miles traveled, which could either replace or supplement gas taxes. This system removes the dependence on vehicle fuel consumption as a measure of road usage, making it able to address the gas tax revenue decline from higher-efficiency conventional vehicles as well as electric vehicles (although some proposed mileage fees only apply to EVs). However, mileage is also not a perfect representation of the effect a vehicle has on roads, as a larger vehicle will cause more burden on roads per mile driven than a smaller vehicle. Mileage charges can vary based on vehicle weight in order to address this issue (existing state vehicle registration systems already apply different registration fees based on vehicle type or weight). Mileage charges are potentially more complex to administer than gas or electricity excise taxes, though, as mileage is not something that is already part of a taxable transaction.

Some proposals in state legislatures have taken a hybrid approach between a flat-rate registration fee increase and a more complex reform like mileage fees. These proposals increase registration fees for electric vehicles, but also increase fees for higher-efficiency conventional vehicles by a smaller amount, with the amount of the fee proportional to the gas mileage of the vehicle. These sorts of proposals aim to allocate transportation infrastructure expenses more accurately among all types of vehicles without necessitating a broad change in the policy framework.

State Electric Vehicle Registration Fee Increases At the End of Q1 2020

Registration Fee and Alternative Proposals in 2020

Only one state, Virginia, has passed an increased EV registration fee so far in 2020 (Virginia already had an increased fee, with the 2020 action increasing it further). Virginia’s new fee system allows EV (and hybrid) drivers to choose between paying an increased registration fee or participating in a mileage-based user fee system. Several other states considered registration fee increases or other alternatives, but none of these proposals have been enacted, and many have died with the end of their states’ legislative sessions.  Some state lawmakers also introduced bills aiming to repeal previously adopted fee increases, but none of these bills have advanced either.

Legislators in Vermont and Washington proposed alternative EV fee systems. A Vermont bill expressed support for the adoption of a per-kWh EV charging fee that would be phased in according to the level of EV adoption. The bill does not specify the amount of the fee or the phase-in schedule, delegating those decisions to state regulators. Washington legislators proposed a miles-traveled fee for EVs and hybrid vehicles, with the fee set at 3.5 cents per mile for EVs and plug-in hybrids and 2 cents per mile for conventional hybrids. The bill requires the state transportation department to develop an implementation plan for administering the fee, including a mileage-reporting system and a payment system. Neither of these bills has advanced in their respective legislatures.

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You can keep up with EV fee and alternative proposals through the 50 States of Electric Vehicle reports or DSIRE Insight’s biweekly EV policy tracking reports.