Pennsylvania drivers enjoy an unofficial subsidy for buying an electric vehicle: When they skip the gas station, they avoid the country’s second-highest gasoline tax.
But that’s about to change, after lawmakers this summer voted overwhelmingly to impose a fee on electric vehicles. The idea is to make electric vehicles “pay their fair share,” said Democratic state Rep. Ed Neilson, chair of the House Transportation Committee.
Right now, he added, “the rest of us subsidize their use of our roads.”
Pennsylvania’s EV fee — $250 annually, once it’s phased in — will be among the most expensive in the country.
But it’s hardly an outlier.
Most states now levy a dedicated fee on electric vehicle owners. Some also have rolled back other incentives, such as New Jersey’s decision this year to restart sales tax on EVs. Or they have reconfigured registration fees to land more heavily on EVs, as in Maryland.
The justification from both Democratic and Republican policymakers for making EVs more expensive is that states are staring down a budgetary cliff.
The gasoline tax — long the backbone of transportation funding — has lost potency as vehicles become more efficient. According to data compiled by the Pew Charitable Trusts, some states collected less from motor fuel taxes in 2021 than during the administrations of George W. Bush or Bill Clinton.
Now, the rise of electric vehicles threatens to make the gas tax obsolete everywhere. Even in states where revenues have continued to grow, lawmakers see a need to design alternative funding models. Some of the ideas are relatively new, such as fees on retail deliveries. Some, like expanding tolls, are almost as old as roads themselves.
States’ most common approach, though, has been to levy more costs on EV owners. Thirty-nine states now charge some kind of annual fee for hybrid or electric vehicles. That includes states that plan to require all new car sales to be zero-emission vehicles by 2035, such as California and Washington, as well as the states with the fewest EVs, like West Virginia and Mississippi.
And as EV sales growth cools, some policymakers warn that states are getting in the way of drivers going electric.
“It’s more of an anti-electric vehicle policy than a road funding policy,” state Rep. Frank Hornstein, the Democratic chair of the Minnesota House Transportation Committee, said of states trying to make up gas tax revenue by charging EV owners.
States face a balancing act: The more quickly drivers go electric, the more quickly gas tax revenues decline; the more states lean on EVs to make up lost gas tax revenue, the more it weighs down EV demand.
The urgency of both goals is growing. Transportation is the largest source of U.S. emissions, but states like New Jersey and Massachusetts are at risk of missing their targets for getting electric vehicles on the road. Meanwhile, 1 in 3 bridges needs repair, according to an American Road and Transportation Builders Association analysis of federal data, and about 7 percent are structurally deficient.
And while some roads and bridges got an upgrade from President Joe Biden’s infrastructure law, more than three-quarters of transportation funding comes from local and state governments — and they have struggled to pay for maintaining the system.
Climate hawks acknowledge these challenges. But they argue it’s too soon to shift the burden of transportation funding onto EVs. The biggest reason behind the gas tax’s erosion has been improving fuel economy in conventional vehicles, they say, rather than EVs, which compose about 2 percent of U.S. vehicles on the road, and in some states much less.
“We’re not at a point where electric cars are in any way, shape or form quote-unquote ‘stealing’ from the gas tax,” Hornstein said. “We’re far from that. … It’s a drop in the bucket.”
EVs will start to impact the gas tax once they become cheap enough to become widely accessible, he said — at which point the state will be able to tax them without creating meaningful barriers to their adoption. But until then, he said the oil industry is the only beneficiary of states making electric vehicles more expensive.
“They’re the ones that are running around talking about this crisis and how electric vehicles are stealing all of this money meant for roads,” he said. “I mean, it’s just not the case right now — I wish it were.”
The push-and-pull between climate and budget goals has left 13 states with policies that offer drivers extra money to buy an EV, before charging them extra for that purchase.
The effect, some lawmakers warn, could resemble pressing the accelerator and the brakes at the same time: lots of sound and friction, only to stay in the same place.
New Jersey, for instance, requires EV drivers to pay their first four years of registration up front — an additional cost of $1,000 that owners of gas-powered cars don’t have to pay. Reinstating sales tax for electric vehicles, auto dealers warn, also will weigh down demand.
New Jersey law has set a target of 300,000 zero-emissions vehicles on the road by the end of 2025. According to state data, as of March there were about 185,000 EVs and plug-in hybrids.
New Jersey does offer a $2,000 subsidy for electric vehicles, plus another $2,000 for low-income buyers. But the program routinely runs out of money, and the state accepts applications for only part of the year.
At least one state, Texas, charges a big enough EV fee that the government collects more money from drivers going electric than continuing to pay gas taxes, according to a Politico Pro analysis. Consumer advocates say EV levies are punishingly high in more than a dozen other states, too.
The extra cost threatens to push drivers away from EVs — in exchange for a pittance of revenue, said Democratic state Rep. Greg Vitali, chair of Pennsylvania’s House Environmental Resources and Energy Committee.
Pennsylvania’s EV fee would raise an estimated $30 million annually by the end of the decade, according to legislative research. The state’s annual transportation spending is around $8 billion.
“It’s really not going to solve any transportation funding issues,” said Vitali, one of only 12 House members to oppose the fee. EV drivers already pay higher prices for their vehicles, he said, and now the state is charging them even more for polluting less. “So something like this is obviously discouraging.”
Albert Gore, executive director of the Zero Emission Transportation Association, said states shouldn’t scapegoat EVs for stagnant gas taxes, or else they risk undermining EVs’ potential benefits to public health, air quality and the climate.
“Gas tax revenue has been declining for years, so this is not exclusively tied to EV adoption,” he said in a statement.
Some progressives say instead of trying to recreate the gas tax — a single, dependable revenue stream linked to road usage — states should instead source transportation funding from a multitude of smaller sources that don’t single out EVs.
Minnesota, for instance, has raised its sales tax on all vehicles and dedicated that revenue to transportation. That state, along with Colorado, also has instituted a fee for retail deliveries such as Amazon. And several states are experimenting with programs that charge drivers based on the miles they drive.
Democratic state Rep. Erin Koegel, who sponsored Minnesota’s retail delivery fee, said nothing can outright replace the gas tax. And because many conventional cars will still be on the road for decades, she said, states should consider leaning more heavily into lower-carbon fuels as a way to lower emissions while keeping today’s transportation funding system somewhat intact.
For better or worse, Koegel said, the transition to electric vehicles is happening gradually. That gives states some time to work out new policies.
In Washington, one of the states with the highest EV penetration, lawmakers are looking at a retail delivery fee to shore up transportation funding.
“Like all states, we are seeing the beginning of the decline of the gas tax,” said Democratic state Sen. Marko Liias, chair of Washington’s Senate Transportation Committee.
“It’s not a crisis. But we’re at a, like, flashing yellow [light],” he said. “If we don’t get our act in gear, we’re going to be in trouble.”
Correction: An earlier version of this story misstated how many electric vehicles are on the road. About 2 percent of U.S. light-duty vehicles were electric in 2023.
