Electric Vehicles: New Technology, New Taxes

 In Inside FleetCarma

Untitled-2Last year, we wrote a blog post discussing how gas tax revenues were down for a number of reasons.  At the federal and some state levels, gas taxes are fixed, and as the fuel efficiency of vehicles increases, less gas is purchased, and tax funds for roads decrease.

In order to maintain aging roads and build new infrastructure several state governments have set their sights on taxing electric vehicles.  All electric vehicles such as the Nissan Leaf, don’t contribute to the current road tax funds.  Plug-in hybrids like the Chevrolet Volt only contribute when they use gas.  For some drivers, filling up their tank is something they do once every few months. Despite their small proportion of overall vehicles on the road, (just 0.36% of the vehicles sold last year) they are a small but easy target to aid state budgets. Lawmakers proposing electric vehicle taxes look at it as a step in the right direction for the future.  Reaction among consumers has been varied, with several saying that a tax seems fair as the roads need maintaining.  However others view the tax as a disincentive for a new technology that may slow the growth of plug-in adoption.

No matter the side of the argument, the largest uncertainty is how such a tax would be implemented. Among the different states considering it, the tax is proposed in two ways; either a tax per mile of electric vehicle usage, or a flat yearly tax.
The flat yearly tax is easy to implement as it would occur hand in hand with license plate registration.  However it fails to distinguish between different levels of use, and thereby wear on roads.  This type of tax is being considered or already in place in states such as Washington, Texas, Michigan, North Carolina and Virginia.  The flat rate tax varies between $75-100 each year.

The ‘per mile’ tax is attractive because it fully accounts for the discrepancy between how much each vehicle is contributing to wear on the roads.  A per mile tax balances the tax from a 10,000 mile/year vehicle to a 30,000 mile/year commuter car.  Where the ‘per mile’ tax becomes complicated is in implementation.  The tax would require either self-reporting from drivers, or government tracking of odometers, a method that raises a number of privacy concerns.  New Jersey Oregon and Arizona are currently considering a tax like this.

What does this tax mean for fleets considering a plug-in? Depending on where you live this will be one more consideration in the Total Cost of Ownership calculations done before selecting new vehicles.  Although many plug-in proponents are worried this tax will negatively impact the financial benefits to electric vehicle adoption, in most cases, the cost associated with taxing these vehicles is far outweighed by the benefit of reduced fueling and maintenance expenses.

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  • David

    I think the ‘per mile’ tax (with odometer self-reporting from drivers) is the best way to go. It could also take into account the weight of the vehicle to get a tax amount that better match the level of wear put on the roads.

  • Steve

    Currently taxes are tied to fuel consumption. The more gallons of gas or diesel you buy the more taxes you pay. An SUV driving 1000 miles will cover the same road as a Prius traveling a 1000 miles but the SUV will pay more taxes as its mpg is much lower. Then it’s weight, but that’s unfair. Somehow tying in mpg to weight and odometer will be best. Annual review with monthly payments.

  • Efreet

    i don’t want to pay it at all, but if i’m forced to, i would rather pay the flat yearly tax. this proposed tax is rife for abuse. why? because in order to smooth things over with the majority of voters who drive gas cars, governments will raise our tax first every time in order to resist having to do it for the gassers. we have a much smaller voice, and will be stomped on.
    i can cynically see a day that EV drivers are taxed at such a high rate, the cost for running our vehicles would come out to being only marginally less than a gasser. when that day comes, i will shake my head with disgust and mumble, “i tried to escape you but you’ve won again, you money sucking parasites…”.