Electric Vehicle Fees, Gas Taxes Rising to Pay for Roads

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Texas joins 33 other states in charging fees on electric vehicles to pay for road maintenance and construction. Several states will see gas tax increases this year.
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Motorists around the country are facing some increased gas taxes. And drivers of electric vehicles aren’t escaping the tax collector either, as states tack on EV fees to help pay for road upkeep and construction.

In Texas, the governor recently signed legislation that enacts a $400 fee to register new electric vehicles in the state. The owners also face a $200 annual renewal fee. The new fees take effect September 1.

The state’s 20-cent-per-gallon gas tax, however, will remain the same. The new EV fees are expected to add $38 million to the state’s highway fund.

Texas’ new law makes it the 34th state to enact fees on electric and hybrid vehicles to shore up reductions in gas tax revenues to pay for roads, according to the National Conference of State Legislatures.

Gas Taxes on the Rise  

Minnesota’s state legislature passed a massive $7.8 billion transportation package in late May, which would index the gas tax to inflation. The bill, which now awaits the governor’s signature, would prevent an estimated $30 billion deficit in tranportation spending over the next 20 years.

The package includes other taxes, such as a 50-cent fee on some retail deliveries and a 0.75% sales tax in metro areas for public transit. The state also charges a $75 annual fee for electric vehicles.

In Illinois, gas taxes are set to rise 6.2 cents a gallon starting July 1. The state also saw an increase in January. The state has been aggressively raising its gas tax since 2018, when it was 19 cents a gallon. It doubled to 38 cents in 2019, after it was indexed to inflation. Following the July 1 increase, the state’s gas tax will be 45.4 cents per gallon. Illinois also charges a $100 annual fee on EVs.

Study: Indiana Gas Tax Improving Roads

Indiana has been pegging its gas tax to inflation and has seen a hefty financial boost for transportation and better road conditions, according to a new report by the Midwest Economic Policy Institute.

Since 2017, when the gas tax increased to 10 cents and then another 21 cents in 2018, the state’s percentage of road miles rated “good” has nearly doubled. The state has also reduced its percentage of bridges rated “poor.”

Along with other fee increases, such as those for vehicle registration, the state added fees for electric and hybrid vehicles. The state also gave local governments more leeway in raising excise taxes to pay for transportation projects and gave smaller communities a better chance at winning matching state grants.

Indiana’s law indexing the gas tax to inflation was set to end after 2024, but the legislature has extended the indexing to 2027. The state’s gas tax is set to rise 1 cent in July.

The state has also increased fees on EVs and hybrids. Those fees were also indexed to inflation to be reset every five years, but the new law raises the fees by 40% and will increase every year based on inflation.

Indexing the Gas Tax

Other states seeing gas tax increases this year include:

  • Maryland is expected to increase its rate 10% to 47 cents starting July 1. Some have called on the governor to halt the increase before it takes effect.
  • Kentucky’s gas tax will rise 2.1 cents in July after the governor froze the increase last year at 26 cents due to higher gas prices. Kentucky also enacted a $120-a-year EV fee in 2022.

Both Maryland and Kentucky use the price of gasoline to adjust their gas-tax rate. Eight other states do the same: Connecticut, Nebraska, New Jersey, New York, Pennsylvania, Utah, Vermont and West Virginia, according to the Council of State Governments

Some other states link their gas taxes to the Consumer Price Index, which is a gauge of inflation. Washington, D.C., and these states set their gas tax based on CPI: California, Colorado, Florida, North Carolina, Rhode Island, Utah and Virginia, according to the CSG.