Dive Brief:
- The Iowa House on April 17 passed a bill imposing additional registration fees on electric vehicle (EV) owners, in an effort to maintain the state's Road Use Tax Fund, which is supported in part by gasoline sales.
- House File 767 would require an additional fee on EV registration, starting at $65 in 2020 and rising to $130 in 2022. There are lower fees for plug-in hybrids, as well.
- If enacted, Iowa would join 20 other states that have taken steps to recoup tax revenue from the lost gas sales of EV drivers.
Dive Insight:
As more drivers go electric, replacing the lost vehicle fuel tax revenue is becoming a concern for states looking to fund their roads. For a growing number, new registration fees have been the solution. According to the National Conference of State Legislatures (NCSL), in 2017, new fees were the most common EV-related measure considered by state lawmakers.
Current EV sales represent only about 1% of all light-duty car sales in the United States, but as sales continue to climb, NCSL says there are "concerns this may lower gasoline tax revenue."
"The repairs and improvements to the nation's highways have traditionally been funded primarily through federal and state taxes collected at the pump," the group said on a website devoted to the new fees. EVs pay the same registration fees imposed on traditional vehicles, however they avoid gas taxes.
While there are still only a bit more than 1 million EVs on the road in the United States, that figure is expected to begin increasingly rapidly. The Edison Electric Institute projects there will be 7 million zero-emissions vehicles on U.S. roads by 2025.
A key to growing adoption is state policy and incentives. According to the National Association of State Energy Officials, fee exemptions and tax breaks are among the most effective policies.
The Sierra Club opposes new EV registration fees, and specifically lined up against Iowa's HF 767. The group says most proposed EV fees would require electric drivers "to pay more than they would in gas taxes."
Sierra Club says the median of current and proposed EV fees is $123/year, while the median amount of gas tax paid by a conventional vehicle owner is $71 per year. Rather than institute new fees, the environmental group says states should hold off until EVs gain further market share, consider fees based on vehicle weight, and look to implement carbon pricing.
If Iowa goes forward with the new EV fees, analysis by the state's Legislative Services Agency concluded they would raise almost $200,000 in 2020, rising to $1.3 million in 2020.
