Texas, Other States Look to Boost Fees on EVs to Fund Highway Maintenance
Texas is considering whether to impose additional registration fees on electric and hybrid vehicles, following nearly half the states that assess higher fees on battery-powered vehicles to compensate for lost gasoline taxes used to maintain roads and highways.
The bills in Texas are unlikely to advance through the legislative session, which ends May 27, but the issue is almost certain to resurface as Texas and other states wrestle with depleted highway funds as cars become more fuel-efficient and federal gas taxes remain unchanged from their levels 26 years ago. With electric vehicles representing 2% of U.S. vehicle sales last year, lawmakers look to revamp the way the nation pays for its transportation network.
States, recognizing that they are losing revenue from gasoline sales, are weighing how to generate funds to fix potholes, repave roadways and build new roads and bridges to support population growth. Lately, focus has shifted from unpopular measures such as higher gas taxes and more toll roads toward a new source of funds: electric vehicle owners who use the roads but don’t pay for the privilege at the pump.
“[Policymakers are saying,] ‘Well, wait shouldn’t we at least start charging people something who pay nothing at all before you start charging everyone more?’ ” said Terri Hall, executive director of San Antonio advocacy group Texans for Toll-Free Highways.
Tesla Model 3s by Patrick T. Fallon/Bloomberg.
Federal and state transportation officials have long struggled with the question of how to pay for maintaining the nation’s roads, highways and bridges in the face of steady improvements in vehicle fuel efficiency. Federal gas taxes, which were last raised in 1993, aren’t keeping up with the wear and tear on highways caused by motorists. Last year, motorists drove a record, 3.2 trillion miles, marking the fifth consecutive year drivers have put on more than 3 trillion miles, according to the Department of Transportation.
Electric vehicles still are relatively rare in Texas, representing less than 1% of all vehicles on the road, but their numbers are increasing. Texas drivers bought 11,800 electric vehicles last year, more than double the sales in 2017, according to EV Adoption, a California consulting group.
Support for those battery-powered vehicles also is expanding. Vehicle battery-charging stations are popping up at grocery stores and shopping malls. New showrooms for the California EV maker Tesla are opening in San Antonio and Dallas. Texas is offering a $2,500 rebate for residents who buy electric vehicles through dealerships.
The momentum has captured the attention of the Texas Legislature, where at least six bills were filed to either raise registration fees for electric vehicles or direct government agencies and universities to study transportation funding in time for the next legislative session. State fuel taxes and sales taxes, a new funding source authorized by voters four years ago, account for about half the $16.3 billion Texas highway fund. An additional third comes from fuel taxes collected by the federal government and funneled back to Texas, and about 10% comes from oil and gas production taxes.
A bill filed by Texas Rep. Ken King, a Republican from the Panhandle, proposed a $200 annual fee for electric vehicles and $100 for hybrids on top of annual registration fees of $50.75 for passenger cars and trucks that weigh 6,000 pounds or less. The new fees would generate an extra $27.2 million for the Texas highway fund in 2020 and $30 million by 2024, according to estimates.
“With the growing number of electric cars on the road, I think it is time that they pay a proportionate share of highway funding,” King said during a House Transportation Committee hearing earlier this year. “EVs, on average, have the same impact on wear and tear on the roads.”
But some electric vehicle owners say the proposed fees are too high, far exceeding the price they would pay for fuel taxes if they bought gasoline. In Texas, drivers of gasoline-powered vehicles pay nearly $8 in federal and state fuel taxes for a 20-gallon fill-up.
To be fair, said Rick Bollar, president of the Tesla Owners Club of North Texas, electric vehicles should pay additional fees of about $70 a year, based on driving up to 12,000 miles a year, to cover their fair share of highway maintenance.
But before Texas singles out electric vehicle owners for special fees, he added,, the state needs a plan to make transportation funding fair for all types of fuels while taking into account how increased fuel efficiency affects highway funding.
“We’re collecting less because everyone is paying less,” said Bollar.
Nationwide, electric vehicle-specific registration fees often are higher than what comparable gasoline cars pay annually in gas taxes, said Max Baumhefner, senior attorney for New York-based environmental group Natural Resources Defense Council.
“It doesn’t make any sense to tax the cleanest vehicles on the road at a higher effective rate than comparable fossil-fueled vehicles,” he said.
New and potential fees are causing concern in the electric vehicle industry that the added cost may discourage sales of EVs, which already can cost thousands of dollars more than gas-powered cars. Electric vehicle sales in Georgia plummeted 90% after state legislators in 2015 repealed a $5,000 state tax credit for new electric vehicles and imposed an annual $200 road user fee.
Electric vehicles sales were booming in Georgia and gasoline sellers panicked, worried they were losing market share, said Joseph Barletta, founder and CEO of Smart Charge America, an Austin company that installs electric car chargers in homes, offices and businesses. That fear among gasoline sellers is affecting legislative efforts in Austin, too, he said.
“Oil lobbyists are trying to suffocate the electric vehicle movement,” Barletta said.
The American Petroleum Institute, the industry trade group, said it has not lobbied for electric vehicle fees in any state.
A similar measure was filed by Texas Sen. Beverly Powell, a Democrat who represents suburban Fort Worth. Powell’s legislation would direct the Texas comptroller to determine how much owners of electric vehicles and hybrids should pay in extra registration fees each year. That bill was considered in committee but never advanced to the full Senate.
But the issue — and legislation — is likely to come back as lawmakers and policymakers see more Nissan Leafs, Chevrolet Bolts and Teslas on the roads.
“It’s not a big deal yet,” said Roman Kramarchuk, who heads renewables research at S&P Global Platts, a research and data firm. “But as states look ahead and see that more of their fleets are electrified, they will realize they are losing more of their gasoline tax revenues.”
