How Are Electric Vehicles Taxed in Your State?

taxfoundation.org ^ | September 20, 2023 | Benjamin Jaros, Adam Hoffer

[fireman15]

U.S. states fund most of their road and infrastructure budgets with revenues from gasoline taxes. The historical rationale behind this is intuitive. The more people use public roads, the more gasoline they consume, making the gas tax a well-designed user fee.

The gas tax is often levied as a specific tax per gallon. While the commodity price of oil can fluctuate dramatically, the volume basis for the tax and citizens’ general dependence on gas for transportation have made the gas tax a stable source for funding roads. Gas taxes also serve as a disincentive to drive, decreasing both traffic congestion and pollution on the margin.

As the market share of electric vehicles (EVs) on the road grows, however, the gas tax’s ability to fund road projects and decrease traffic congestion erodes. Both federal and state real tax revenue per vehicle mile traveled has been on a steady decline for decades, creating a fiscal gap for road expenditures even as the demand for road infrastructure improvements has grown.

EVs produce lower emissions than traditional combustible-engine vehicles. Combining the fiscal gap with a desire to incentivize lower-emission vehicles, states have responded with a variety of tax policies.

The following map depicts states’ different approaches to incentivizing EV adoption and the imposition of higher registration fees for EV ownership.

[fireman15]

More and more studies are showing that if one looks at the source of the electricity for electric cars, the energy loss from the grid, the energy loss when charging and discharging EV batteries, along with the amount of energy it takes to produce EVs and their batteries to start with that they are actually much less efficient by basically every measure than normal economy cars. EVs have a short expected life span because their batteries are so expensive that it is typically not financially viable to replace them in a vehicle with an extremely high depreciation rate.

There is currently a Federal Tax Credit of $7500 on electric vehicles and the manufacturers themselves are receiving $Billions of dollars in incentives, credits and other forms of government subsidies.

https://www.greencars.com/expert-insights/electric-cars-eligible-for-the-7-500-tax-credit-in-2023?

[Pontiac]

The only way I will ever own an Electric Car is if someone gives me one.

And if that unlikely event ever happens it will be a short lived ownership

I will sell it ASAP.

[fireman15]

In Washington State we currently have the highest gasoline taxes in the country, although this is concealed by calling most of the amount charged a “cap and trade” fee and not a tax and this fee varies. According to authorities the tax is only $.49.8 per gallon, along with a $.18.4 per gallon Federal tax, but the “cap and trade fee” is currently $.62 per gallon, bringing the total to over $1.30 per gallon. Of course, EV’s pay none of this. They pay only a $150 yearly fee and no sales tax which makes what they are taxed thousands of dollars less than other vehicles.

[napscoordinator]

It’s going to be done through attrition. It’s going to take decades. They will transition gas station with electric stations. Eventually it will be difficult to find gas. And then it will be complete. We all here will be dead. I’d say around 2050 it will be over. I’d be 81. We don’t have longevity in mt family.

[SaxxonWoods]

Expensively, I hope. They cause a lot of road damage/wear and shed rubber like crazy. Their fires cost a lot to manage and their emissions during a burn are very dangerous to firefighters.

[fireman15]

The only way I will ever own an Electric Car is if someone gives me one.

It is very possible that at some point someone may give you an electric car. Without a decent battery after 8 or 10 years most of them have basically no market value because a replacement battery costs far more than what the car will be worth with the replacement battery installed.

Who knows what type of solutions will come up when there are large numbers of worthless electric cars on the market in a few years. In China there are junk yards filled with newish looking electric cars that are worth nothing and have been abandoned. The technologies have changed and retrofitting is financially unfeasible.

[silent majority rising]

Don’t plug it in to your house. They cause fires...

[Seruzawa]

A $5000 per year flat fee sounds good.

[fireman15]

It's going to be done through attrition. It's going to take decades. They will transition gas station with electric stations. Eventually it will be difficult to find gas.

The current trajectory might be in the direction that you are predicting. But the political will to keep imposing the government idiots' solutions to non-existent problems will likely waiver causing the actual future to be unpredictable. Our current infrastructure cannot support "transitioning" to electric vehicles without $Trillions being spent on increased generation and transmission capacity. The country is already essentially bankrupt. It is likely just not going to happen.

[ChildOfThe60s]

EVs produce lower emissions than traditional combustible-engine vehicles

They do not. If they're going to write an article like this they should at least be intellectually honest. Instead it's all about the greenbacks.

[EVO X]

Illinois charges EV owners ~$150 extra for the yearly license plate fee. We have some sort of goofy onetime rebate for EV purchases. The program is only open for a few months or until money runs out. They also prioritize the rebate by income.

[chickenlips]

That does sound good, but a mileage tax is more likely.

Insurance rates will also become a factor for EV’s. If they can’t be repaired cheaply and they are a fire risk, insurance rates will go up to pay for it. Not just auto insurance, but homeowner policies and freight carriers’ insurance could be impacted too. That is unless the gumment passes laws against the rate hikes, leaving us ICE owners to subsidize the farce.

[ridesthemiles]

$7500 TAX Credit ONLY applies to vehicles built with UNION LABOR..
TESLA IS NOT UNION.

[HartleyMBaldwin]

I don’t see a complete replacement of ICE by EVs, even over decades. Pushback is already starting as more people see that EV adoption is going to cost lots of money, with no benefit to most of the ones doing the paying. Once enough people decide they don’t want EVs, and don’t want to pay for others’ EVs, politicians who support EVs are going to have a much tougher time getting elected.

Of course, if the U.S. government becomes totalitarian enough quickly enough, all bets are off.

[fireman15]

$7500 TAX Credit ONLY applies to vehicles built with UNION LABOR.. TESLA IS NOT UNION.

Guess again... That is not what it says on the Tesla Website.

“As part of the 2023 Inflation Reduction Act, eligible businesses and tax-exempt organizations can claim up to a $7,500 credit when purchasing new Tesla vehicles with a gross vehicle weight rating (GVWR) of up to 14,000 pounds. All Tesla passenger vehicles qualify for this incentive:”

https://www.tesla.com/support/incentives#

You or someone else has made this false claim previously on this forum. And you or someone else was corrected at that time. Where are you getting this information?

[Yardstick]

Well, Tesla will replace the battery under warranty for up 8 years/150K miles if it has less than 70% capacity. That means used Teslas in the 8 year old range would tend to have batteries with at least 70% capacity. To me that’s still a vehicle with some value. Even a vehicle with only 50% capacity could still be a used as an in-town commuter vehicle, it would seem.

The Tesla model 3 went on the market in 2018 so the oldest ones are around 5 years old now. I just checked eBay and the ones in that age range with around 100K miles seem to sell for $15K - $20K.

It’ll be interesting in the coming years to see how the market values EVs that have moderate loss of battery capacity. Will they be considered worthless bricks or will they still retain some value?

It’ll also be interesting to see how the falloff in battery capacity really works in the real world. Will it decline gradually to a certain level and then fall off a cliff? Or will it kind of level out so that it stays fairly constant for a number of years? Or will it decline steadily along a sloping line to zero?

[Crusher138]

Transitioning to electric cars will take a couple of things that may or may not happen.

1. Major improvements in battery technology. Charging time, capacity and safety are all issues that need to be addressed. Carbon nanotube technology holds promise, but scaling up the manufacturing has been troublesome.

2. Electrical Grid Upgrades/Modernization. The left has to get over their fear of nuclear energy. The only way electric cars will get widespread use is with nuclear power generation. With large nuclear facilities taking decades to come online, small nuclear reactors and innovative technologies like thorium reactors will have to be adopted to meet our future power needs. Solar and wind power will continue to be supplemental at best.

3. Charging standardization. Currently (see what I did there?) there are several worldwide charging interfaces that are incompatible with one another. Imagine pulling up to a gas pump and the nozzle doesn’t fit your car!

4. Charger availability. Charging at home is all well and good...as long as your home doesn’t catch fire...but if you are traveling across country, having charging stations where you need them, that actually function, that work with your vehicle (see #3) that have somewhat regulated pricing - there have already been reports of price gouging at some chargers - is critical to widespread adoption.

Some of these things could happen through market forces, some may require government intervention. The problem is, the current system isn’t all that broken. While environmentalists try their damndest to convince everyone that the sky is falling, looking around most people just don’t see it. It is much more likely that the Greenies are just tools of those who would like to wrest power from those whose fortunes are base on the mis-labeled fossil fuels. The environmental movement has more to do with control and power than protecting the earth.

[lightman]

The average EV is much heavier than the average passenger car; therefore their registration fees should be in line with smaller commercial vehicles.

“Mileage tax” at roughly $0.04/mile would be no more burdensome for anyone if that were to replace liquid fuels taxes.

But the pols are trying to make it a big money grab by pushing $0.08/mile.

[Myrddin]

EVs produce lower emissions than traditional combustible-engine vehicles. Combining the fiscal gap with a desire to incentivize lower-emission vehicles, states have responded with a variety of tax policies.

EV just produce emissions away from the point of use. The emissions are still there. EVs are heavier the ICE vehicles and damage road surfaces more. EVs are also potential fire hazards on the road, in parking lots and in homes. Any emissions reduction is rapidly wiped out in a lithium ion battery fire.

[EVO X]

There is LFP battery technology that addresses some of the battery degradation issues, but there pros and cons. Here is a article that explains them. Looks like Tesla is going live with LFP batteries for standard range batteries.

https://www.recurrentauto.com/research/lfp-battery-in-your-next-ev-tesla-and-others-say-yes