The EV Tax Debate: Should Electric Vehicle Owners Pay More to Use the Roads?

As electric vehicle (EV) adoption accelerates across the U.S., states are grappling with a major funding dilemma: how to replace the billions of dollars traditionally generated by gasoline taxes, which have long funded infrastructure and road maintenance. Since EVs don’t use gasoline, their owners don’t contribute to these taxes, leading states to explore alternative revenue models—most notably, additional EV registration fees.

How Gas Taxes Fund Roads—and Why EVs Are a Problem

For decades, gasoline taxes have served as the primary funding source for road repairs and infrastructure projects. In 2022, the federal gas tax generated about $36 billion, with state fuel taxes adding billions more. However, as EVs grow in popularity, this funding model is being disrupted.

According to the Bureau of Labor Statistics, EVs now account for about 10% of new car sales and could make up as many as 40% of all vehicles by 2030. That’s a significant number of drivers who are no longer contributing to road upkeep through gas taxes, prompting many states to impose new EV-specific fees.

“We have to think long-term about how we’re going to maintain our roads,” said Susan Howard, director of policy and government relations for the American Association of State Highway and Transportation Officials (AASHTO). “As gas tax revenues decline, we need a sustainable alternative that ensures fairness for all drivers.”

State-By-State EV Fees

So far, 39 states have implemented additional annual registration fees for EVs, ranging from $50 to over $250 per year. Here’s how some states are handling the issue, according to NCSL:

• Georgia:Charges non-commercial EV owners $200 per year and commercial EV owners $300
  
• Indiana:Raised its annual EV fee to $221 in 2023 to offset declining gas tax revenue. Hybrid fees increased to $74.
• Texas:Imposed a $400 annual EV fee for newly registered vehicles and a $200 charge for subsequent years.
• Utah:The state charges a $138.50 additional annual fee for EVs and vehicles fueled by a source other than motor fuel, diesel fuel, natural gas or propane. There is also a $60.25 additional annual fee for plug-in hybrid EVs and a $23.25 charge for hybrid EVs.
• Ohio: Ohio has a categorized approach, charging annual fees of $200for battery electric motor vehicles, $150 for plug-in hybrids, and $100 for traditional hybrid automobiles.
• West Virginia: The state imposes a $200annual fee on EVs and a $100 fee on hybrid vehicles.
• Wyoming: Plug-in electric vehicle owners pay an annual flat fee of $200.
• Missouri: Missouri charges a $120 additional annual fuel decal fee for alternative-fueled passenger motor vehicles up to 18,000 lbs and a $60additional annual fee for plug-in electric hybrid vehicles.
• Illinois: The state charges an annual $100flat fee for electric vehicle registration.
• Kentucky: As of January 2024, Kentucky has imposed a $120registration fee for electric vehicles and a $60 fee for hybrid automobiles.
• Kansas: All-electric motor vehicle owners are required to pay a $100annual registration fee, while electric hybrid and plug-in hybrid vehicle owners pay $50.
• North Carolina: The state imposes an annual registration fee of $180for electric vehicles and a $90 annual fee for plug-in hybrids.
• Alabama: EV owners are subject to a $200annual registration fee, with an additional $100 fee for plug-in hybrid vehicles.

The state of Oklahoma has one of the most interesting approaches, charging EV owners by the weight of their automobile:

• Under 6000 lbs. (Class 1) – $110
• 6000 – 10000 lbs. (Class 2) – $158
• 10000 – 26000 lbs. (Class 3-6) – $363
• Over 26000 lbs. (Class 7-8) – $2250

The annual fee for plug-in hybrids is dependent upon weight:

• Under 6000 lbs. (Class 1) – $82
• 6000 – 10000 lbs. (Class 2) – $118
• 10000 – 26000 lbs. (Class 3-6) – $272
• Over 26000 lbs. (Class 7-8) – $1687

In some states, these fees can be nearly triple what the average gasoline driver pays in fuel taxes per year. Critics argue this unfairly penalizes EV owners, while proponents say it’s a necessary measure to ensure all road users contribute fairly.

The Pushback: Are EV Fees Discouraging Green Adoption?

Consumer and environmental advocacy groups worry that these extra costs could discourage EV adoption, undermining climate goals and slowing the transition away from fossil fuels.

“The unintended consequence is that we’re taxing the very people who are helping reduce emissions,” said Katherine Garcia, director of the Clean Transportation for All campaign at the Sierra Club. “Instead of imposing high fees, we should be incentivizing clean energy solutions.”

A 2019 Consumer Reports study found that many of these state EV fees exceed what the average gasoline-powered car owner pays in gas taxes. This could disincentivize drivers from switching to electric, making it harder to meet the Biden administration’s goal of having 50% of new car sales be electric by 2030.

The Federal Perspective: Biden vs. Trump on EV Policies

At the federal level, President Joe Biden’s administration strongly backed EV tax credits and infrastructure investments, aiming to make electric vehicles more accessible to middle- and lower-income Americans. The Inflation Reduction Act of 2022 provided up to $7,500 in tax credits for new EV purchases and up to $4,000 for qualifying used EV purchases, and tied incentives to domestic battery production.

However, sitting President Donald Trump, who is currently serving his second, non-consecutive term in office, has vowed to repeal many EV-related incentives, arguing that they hurt traditional automakers and unfairly favor companies like Tesla. His administration has also pushed back against federal mandates on EV production quotas, which could directly impact the tax structure for these vehicles.

“Democrats are trying to force-feed…drivers expensive electrical vehicles – vehicles that we don’t need, want, and most families can’t afford,” said Senator John Barrasso (R-WY), a vocal critic of Biden’s EV policies.

Alternative Solutions: What’s Next?

Rather than imposing flat fees, some policymakers are exploring alternative ways to make up for lost gas tax revenue. These include:

1. Mileage-Based User Fees (MBUF)

Also known as “road usage charges,” this model would tax drivers based on miles driven, rather than fuel consumption. States like Oregon and Utah have pilot programs testing this system.

2. EV-Specific Tolls

Certain highways could introduce higher tolls for EVs, ensuring that they contribute to road maintenance without discouraging adoption.

3. Corporate Contributions

Some policymakers suggest requiring automakers to contribute a percentage of EV sales revenue toward infrastructure maintenance.

Nick Smallwood, chief executive of the Infrastructure and Projects Authority, shared an alternative option – road pricing – with The Guardian:

“We need to consider how we replace fuel duty as we move towards electric vehicles. Road pricing is one option that could provide a sustainable long-term solution.”

While Smallwood was specifically referring to the United Kingdom, road pricing –  a system of fees including tolls, congestion charges, and other costs – is already used in the United States. Expanded toll roads, for instance, could help states recoup money lost from increased EV usage.

As states continue to tweak their revenue models, the debate over EV fees vs. gas taxes will only intensify. With EV adoption growing rapidly, finding a fair and effective way to fund infrastructure is crucial.

For now, EV owners in most states should expect to pay additional fees, but the exact amount—and whether it remains fair—will likely remain a hot-button issue for years to come.