How Do Electric Vehicle Fees Compare To The Gas Tax?
By: Electric Motoring W Dave Clark
Tags: Electric Car, Tesla, Taxes, Electric Vehicles

In the United States, the transportation infrastructure, which includes roads, bridges, and public transit projects, is partially funded from revenue generated by the taxes paid every time you fill up your gas-powered vehicle. For every gallon of gas, you are paying the Federal government 18.4 cents. Drivers of diesel-powered vehicles pay 24.4 cents. On average in the United States, every driver paid around $100 per vehicle in federal gas taxes in 2019. This equaled more than $40 BILLION in total taxes paid by consumers of all fuel types. However, this does not include the revenue generated from State-imposed gas taxes, which vary state by state. Additionally, some reports have estimated that only about 30% of the costs associated with the road infrastructure in the United States are paid for via funding from the gas tax.

In California, which has the highest state-imposed gas taxes at 61.20 cents per gallon, the average driver pays $330 a year in gas tax. While Alaska, the lowest is only 14.66 cents per gallon or about $80 a year. The United States average state-imposed gas tax is 30.11 cents per gallon or around $164 per year.

But, electric vehicle drivers pay zero.

When non-EV drivers hear this, they often get enraged that they seem to be paying for something that others are not. But, is that actually true?

As of today, an EV driver is not paying any gas tax for the obvious reason, as they don’t need gas to use their cars. This means they are not contributing to the Federal Highway Trust Fund, which is where the 18.4 cents per gallon of gas goes to pay for some of the Federally-funded road construction, maintenance, and other transportation projects.

However, that could change in the future. In October 2018, Sen. John Barrasso of Wyoming and the head of the Senate Environment and Public Works Committee proposed a new Senate Bill. S.343 the Fairness for Every Driver Act, or FED Act for short, would levy a highway user fee that would be paid when a driver files their annual tax return. As to how the fee would be calculated, the Bill states it will take the average gallons of fuel consumed by the same vehicle type category and multiply that by the current gas tax rate, which is 18.4 cents per gallon today. Those funds would be added to the Federal Highway Trust Fund for use.

So for example: As of Spring 2020, the average driver in the United States drives 13,500 miles, and the average miles per gallon, or MPG for a standard car is 24.9, this would equate to a highway user fee for every EV of about $100 per year which is about equal to the average gas tax paid by internal combustion engine car drivers, as discussed earlier. What the bill does not take into consideration is those who drive less than or more than the statistically average miles driven per year. All vehicles, no matter how much or little they are driven would pay the exact same user fee. For example, I have a long commute 3 days a week and drive my Tesla Model 3 between 25,000–30,000 miles a year, yet I’d pay the same Fairness for Every Driver Act tax as someone who drives only 10,000 miles a year in their electric vehicle if implemented.

As of February 2020, it is estimated there are nearly 1.5 million electric vehicles in the United States. If this Bill were to pass this year, it would generate more than $150 million of additional revenue for the Federal Highway Trust Fund. Currently, the annual revenue generated by those paying the 18.4 cents per gallon tax is nearly $26 Billion.

As of December 2020, the Fairness for Every Driver Act has not been passed and is not law. But, in February 2019, the Bill was referred to the Committee on Finance, which is where it still remains active today and pending further action by Congress.

But there is more to how the road infrastructure is paid for in the United States. As discussed earlier, each state also has its own gas tax rate levied at the pump. The taxes raised go toward infrastructure projects of need for their residents. But, unlike the Federal government, many state governments have already taken action to reclaim those lost taxes from EV drivers.

By the start of 2020, 28 states required electric vehicle owners to pay an annual extra registration fee. 8 additional states are currently considering proposals to implement fees. However, 14 states currently have no fees and no proposals to implement fees within their state legislatures.

There have been several news articles about States implementing EV fees that well exceed the taxes being paid by consumers at the gas pump. I have seen numbers as high as 300% more. The data provided was often limited in how they determined their calculations or made assumptions that varied greatly, such as how many miles driven a year per vehicle and what is the average miles per gallon for a car. So I used the numbers published by the federal government in 2019 as my baseline comparing only the costs associated with EV fees vs gas tax which is the primary reason why these fees have been implemented by the vast majority of the states.

To help me understand this topic, I put together a Google spreadsheet.

First, do note that this data was finalized on February 15, 2020, and the fees and tax rates could have changed by the time you are reviewing this data.

First, the spreadsheet broken down into 2 tabs, the first tab has all the data for the States that currently have a fee imposed on electric vehicles. The second tab contains the states that currently do not have a fee and/or are considering a fee in the future.

Section 1 is the current fees for each of the 28 states that charge an annual fee to drive an electric vehicle. As you can see the annual fees vary widely by state. From a low of $50 for Hawaii and Colorado to a high of $212 for Georgia. In some states, they are considering even higher fees. In July 2019, Illinois proposed a $1,000 annual fee for electric vehicles, but the proposal did not pass, and they settled on a $250 fee. Overall, the average annual EV fee is about $122 in the United States.

Section 2 is the current state gas tax rate in cents per gallon as shown in the first column and the second column has the annual average cost a driver pays to fuel their vehicle in the specific State. This data is based on the national average miles driven per year of 13,500 and using the 2019 national average miles per gallon for a vehicle of 24.8. The annual national average of gas tax paid per vehicle is around $175.

Section 3 is where we start to see the real-world data of EV fees vs the state gas tax. The first column shows the difference between the EV fee and the State Gas Tax based on the national average miles driven per year.

The orange color shows EV drivers are paying more vs a green color they are paying less. Based on this comparison, 6 states, Alabama, Arkansas, Georgia, Mississippi, West Virginia, and Wyoming are the only states that are charging EV drivers more than comparable gas power car drivers, which averages 42.60% more. Meanwhile, in 22 states electric vehicle drivers are paying, on average 42.21% less. Overall the average for all states with an EV fee, shows drivers are paying about 30% less than other drivers. Do note, this is only comparing the state EV fees vs the state gas tax. This is not considering the federal gas taxes also paid on every gallon of gas purchased.

Section 4 brings the federal gas tax into the equation. Currently, the federal gas tax is 18.4 cents per gallon. The first column of this section shows the total average gas tax paid by consumers for those same 13,500 miles for both state and federal gas taxes. The second column shows the difference between the EV state fees and the total gas taxes. And the third column is the percentage difference. Clearly, when both the state and federal gas tax is combined the electric vehicle driver is paying less in every single state of the country, on average 55% less. This is primarily because there is currently no federal EV fee or tax.

Section 5 is more theory, we start to forecast what would happen if the Federal government decided to pass the Fairness for Every Driver (FED) Act that we discussed early. How would that balance things out with EV fees compared to gas taxes?

The first column of this section shows what each state electric vehicle driver may pay for both the proposed FED fee and the current state fees. Remember from early, where we estimated this FED proposal may implement a $100 additional fee on top of the state EV fees. The second column shows the difference between what an EV driver would pay with the included proposed FED fee and state EV fees vs the cost to consumers for the state and federal gas taxes. Finally, the third column shows the percentage difference between the EV fees and gas taxes. Here we see that once again the same 6 states would be more expensive for EV drivers, on average, than their gas power car counterparts. But, in 22 states it would be less. From a national average perspective, if the FED Act goes into law, EV drivers would still be paying 19% less.

For those of you lucky enough to live in a state where there currently are no additional fees to drive an electric vehicle you may have been hearing about your state legislatures talking about imposing a new one in the near future. The second tab of the spreadsheet shows the 8 states looking at implementing an EV fee. The chances are good that eventually, every state will have some kind of fee for electric vehicles to make up for the lost revenue in gas taxes.

In my opinion, it is only fair for electric vehicle drivers to pay toward the costs of building and maintaining the road systems that are currently funded primarily by the federal and state gas tax. But, EV fees should also not be disproportionately in favor of or against those drivers. But, getting a discount for driving a clean, environmentally friendly transportation alternative should be utilized for publicity by the state and federal governments to incentivize people to transition to electric vehicles.

This article is also a YouTube video: https://youtu.be/oRyX8n1YRCs