“Big, Beautiful Bill” Imposes Annual $250 Registration Fee
The $250 annual registration tax is the mayonnaise on the s**t sandwich that is the reconciliation bill that recently passed the House of Representatives. And, oh yeah, it would be retroactive.
EVs should contribute to the transportation fund, but this is not the way to do it.
Purpose Of The Tax (and the Bill Writ Large) Is To Discourage EV Adoption
The ostensible purpose of this tax is to fund highway construction and repair. The cynicism is palpable. This is a simple-minded, unfair tax, that when viewed in the context of all the anti-environmental measures in the bill, plus other actions outside the bill (e.g. freezing NEVI funds for charging infrastructure), it is readily apparent that the transportation fund has nothing to do with it. The point is to discourage EV adoption.
It is true that the transportation fund is facing a shortfall, but the reason is not EVs, of which there are still far too few to have much of an impact. And if their strategy is successful, there never will be enough to matter.
The reason for the shortfall is that the federal gas tax, which sits at 18.4 cents per gallon, has not been raised since 1993. An analysis from Atlas Public Policy stated that had it been indexed to inflation, there would be no shortfall.
Comparison To ICE
The average new ICE (internal combustion engine) vehicle gets 27 MPG (2023 – per the EPA). If the vehicle is driven 12,000 miles in a year, that works out to $81.77 of taxes paid. If there has been any thought or analysis that went into the EV fee, it isn’t apparent, and certainly hasn’t been made public.
Of course, that is normative data. When a consumer buys an ICE vehicle, part of the decision-tree is fuel efficiency. That, plus utilization determines the amount of taxes paid. It is individualized. This EV tax is one-size fits all with no accounting for MPGe, battery pack size, utilization, or overall appropriateness of the fee.
Let’s take a step back for a moment. All things being equal, should taxation even be equivalent between a pollution-spewing ICE vehicle and a zero-emission EV? Have we lost sight of why we advocate for EVs in the first place?
How Should We Think About Funding?
The first thing to do is make an adjustment to the gas tax. Not indexing the tax to inflation is yet another indirect fossil fuel subsidy, of which there are many.
A fair method of taxing EVs would start with defining the appropriate amount of revenue to be raised and incorporating the variables needed to get us there. It isn’t that hard. Also, there are alternatives to an annual fee. Two that have been widely discussed are mileage taxes or tolls. There could be a tax on charging. The point is to create a policy that is fair and equitable, which ideally has provisions to protect lower income individuals, and does not undermine efforts to ameliorate climate change and improve air quality.