Just behind Michigan, Indiana is set to implement a US$150 tax on EVs to cover road maintenance
A bill was filed by Indiana House Republicans last Wednesday to begin taxing EV drivers for the use the of roads they drive on, following steps taken by 10 other states in the US.
In the US, gasoline and diesel are taxed federally in order to pay for road repairs across the country. The federal Highway Trust Fund receives an 18.4% tax on gas and a 24.4% tax on diesel, which is then divvied up amongst projects within individual states, depending on which roads are in most need of repair.
50% of funding for these projects is provided by the state (e.g. Indiana), while the rest of the project must be funded by county governments. A rise in EV ownership coupled with poor road conditions has prompted many communities to support the new tax bill, in order to shore up revenues otherwise lost on gasoline and diesel.
Washington charges a flat US$100 annual tax, Virginia a US$64 charge, and Michigan is looking at a US$200 increase in registration fees for hybrids and EVs from 2017. It is expected that Indiana will charge an annual fee of US$150 if the bill is passed. Other states which charge EVs are Wyoming, Colorado, Nebraska, Missouri, North Carolina and Idaho.
Taxing EVs via these methods seems somewhat convoluted, considering most states have various tax rebates or other legislation to encourage uptake. It even seems that some states are going backwards. In 2015, Georgia ended its US$5,000 tax credit for EV drivers and began charging them a US$200 “registration fee” instead. Financial incentives for EVs are still imperative, so cut-backs and petty charges for registering certainly appear counterproductive.
Yet as EVs become more popular the Highway Trust Fund will become more stretched for cash as less people have less need for gas and diesel. The country’s roads are already in bad shape, and Indiana in particular is in dire need of money for road repairs, having received over 1500 applications from 325 communities within the state for road repairs last year.
It’s a GO for Oregon
Instead of arbitrarily charging EV drivers a random amount of money, the state of Oregon is convinced that it can distribute charges fairly. OReGO will get users to pay by the mile. Piloted in 2013, the program asks users to attach a device to their car which counts how many miles are driven annually. The state then charges drivers 1.5 cents per mile driven. Although trialled successfully, the project still hasn’t gone through legislation; however, it received US$14 million in federal funds in 2016.
Oregon is very excited about the project, even having produced an app by which users can check how many miles they’ve driven and how much tax they can expect to be charged. Still, drivers pay a little more than they would at the gas pump: OReGO volunteer Evan Burroughs said he pays “a dollar a month, two dollars a month, something like that… very, very minimal.”
According to the US Department of Energy, the average car driver travels 11,244 miles per year. This means that OReGO would make an average of US$168.66 per year from each car. This figure is much higher than revenue from conventional fuel cars, which according to our calculations totals US$88.32 per car per year. Nonetheless, the government would lose US$1,349.25 per year for every gas-guzzling Class 8 Truck which switches to electric; quite a shortfall. The question is whether money made from EV cars can make up for this loss.
Other solutions may be in the mix, for example asking EV companies to pay a higher level of tax or through applying tax to public charging stations.
As a tax on miles driven, OReGO seems to be the fairest of the current systems. However, it is questionable whether this will allow states to make the money they need for road repair.
However, the disagreement between states highlights the fact that as EV uptake grows, governments worldwide must reevaluate how such vehicles are taxed – lest they suddenly find themselves with a serious shortfall in revenues.