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As more people switch to electric vehicles, states could lose millions of dollars

Electric Cars
Posted at 2:25 PM, May 16, 2022

The electric car boom is coming. Last quarter, 4.5% of car sales were electric vehicles, according to Kelly Blue Book.

By the year 2050, that number is expected to rise to 60%.

With the effects of climate change becoming more pronounced than ever before, it is good news for the country’s plans to limit carbon emissions, but it is also proving to be a challenging one for state tax budgets.

“When you look out to 2045, which isn’t that far away, we estimate gas tax to decline significantly and sales tax to represent 60% of the money for transportation and that is not sustainable in the state of Kansas or really anywhere,” said Julie Lorenz, secretary for the Kansas Department of Transportation.

In every state, regular gas is taxed at a different rate. It ranges from $0.09 per gallon in Alaska to $0.58 per gallon in Pennsylvania, with an average of $0.30 nationwide. The rate for diesel is even higher.

Additionally, the federal government taxes $0.18 cents per gallon. In many states, there are extra fees for things like greenhouse gas programs and tank storage.

But electric vehicles do not use gas, so as their numbers rise, states plan to lose out on tens of millions of dollars each year that would otherwise help fund projects, like highway work, road construction and public transit.

“These are big investments that need to stand the test of time,” said Lorenz.

To counter it, registration fees on electric vehicles are higher, but that is a flat rate. It doesn't account for miles driven, so states are discussing the possibility of introducing mileage fees. People would be charged for miles driven, not gallons filled.

Currently, Oregon is the only state in the country with such a program, but it is voluntary. It charges drivers $0.018 cents per mile driven instead of a gas tax. According to the National Conference of State Legislatures, 12 other states have received federal grants to explore similar options. The states include California, Delaware, Hawaii, Kansas, Minnesota, Missouri, New Hampshire, Ohio, Texas, Utah, Washington and Wyoming.

“So, as we move away from paying based on the kind of fuel we use, to the kind of infrastructure, or the amount of infrastructure we use, we have to think about pricing it differently,” said Lorenz.