New Fees On Electric Cars To Go Into Effect In 2020

Electric car owners will be ringing in the new year with new fees. According to CNBC, an increasing number of states are passing laws charging owners of electric vehicles with registration fees to offset forgone gas taxes.

Approximately half of U.S. states, including Mississippi, are set to impose new fees on EV owners or will add onto existing fees beginning this week.

EV fees to provide infrastructure investments

The goal of the EV fees, which will include SUVs and trucks, is to make up for gaps in roadway infrastructure investments that derive from gasoline taxes. On average, fueling a vehicle with electricity measured in Watts is roughly the same as fueling a vehicle with gasoline at $1 per gallon.

The fees come at a time when electric and plug-in hybrid vehicles are expected to see a rise in market share. Despite the fact that these vehicles comprise less than 2% of new vehicle sales, state officials hope the new fees will make up for at least part of the lost gas tax revenue.

“I think states are still trying to determine what is a fair or equitable fee on these electric vehicle owners,” said Kristy Hartman, the energy program director at the National Conference of State Legislatures.

The charge for EVs will be $50 in Hawaii, $100 in Kansas, $200 in Alabama, and $200 in Ohio. The charge in Mississippi since 2018 has been $150.

States are changing legislative course

The federal government and some states have offered incentives for people to buy electric vehicles in years past. But some states are switching course and federal tax credits are beginning to phase out for the more popular electric vehicle models.

Despite the incentive to buy the vehicles, EVs still haven’t seen the wave of buyers that many companies like Tesla and General Motors have been expecting. There were more motorcycles purchased in 2017 (427,000) than there were electric vehicles (200,000).

Because of the small population of EV owners, there could be a chance that the new fees could not only be ineffective at filling in the gasoline tax gaps but also deter new owners from investing in electric cars. However, the fees could also help to level the playing field between EVs and gasoline-fueled vehicles.

For example, Illinois has discounted two-year license plates for EVs at $35 to balance out the state’s $98 annual EV registration fee. Under the new law passing in 2020, both registration fees and fuel taxes would increase to a new basic annual rate of $148 with an additional $100 to offset lost fuel taxes.

Setting a fair fee for EVs

“[The fee will bring] more than just a fairness relative to maintenance and construction of infrastructure,” said Bill Poole, Alabama’s state representative who sponsored the legislation. “I think it went further in terms of planning for the future.”

Loren McDonald, a California-based industry analyst, says that it’s difficult to set a universally fair fee for electric vehicles because average commuting distances vary by vehicle owner. While trucks move 71.5% of the country’s freight and two-thirds of Canada-US trade, other drivers in large cities may rarely use their vehicles.

“States are actually being very reasonable about this,” said McDonald. Some states, she says, are charging less than what EV owners would otherwise pay in fuel taxes.