4 Reasons Why Sky-High Registration Fees for Electric Vehicles Don’t Make Sense

by Nachy Kanfer

In most U.S. states, electric vehicle (EV) owners must pay an additional fee as part of the annual vehicle registration process. My home state of Ohio has one of the highest fees in the country at $200 per year ($100 for hybrid vehicles). As a point of comparison, a typical 4-door sedan with no vanity plates in Hamilton County, Ohio owes around $65 in state and county fees every year. Even California, often one of the most progressive when it comes to fuel efficiency and alternative energy, has an EV registration fee.

The policy logic of asking EV drivers to pay some measure of incremental fees seems sound at first blush, at least in principle. Highways are largely constructed and maintained with proceeds from gas taxes. For example, in Ohio, 38.5 cents per gallon of gasoline goes to state coffers and another 18.4 cents goes to the federal government.

EV drivers never buy gasoline (and drivers of hybrid vehicles don’t buy very much). So, as EVs gain rapid market share, we expect to see tax revenues from gas sales decline, impairing the government’s ability to maintain roadways. It makes sense for EV drivers to contribute to road maintenance and since they never buy gas, charging them an additional fee during the annual registration process is one way to do this.

But bear with me for some arithmetic, and you’ll see how unfair and punitive some of these fees can be. I’ll use Ohio’s EV registration fee to illustrate.

Double Taxation

First of all, electricity is already taxed in Ohio -- so EV drivers are getting taxed on the electricity they use as well as the gas that they don’t use. EV drivers in Duke Energy Ohio’s service territory pay $0.00465 per kWh. It takes approximately 1 kWh to drive three miles in an electric car, so someone driving 10,000 miles per year already pays $15 in taxes. (Of course, these taxes don’t go directly to support highway construction and maintenance.)

Wrongly Assigning Cause

Second, the EV fees assume that the average new electric vehicle contributes as much to the need for highway and road maintenance as the average new vehicle with an internal combustion engine. This assumption fails basic common sense. No one thinks that a handful of Teslas and Chevy Bolts are destroying our roads and need to pony up for pothole repair. In fact, the problem is almost exclusively heavy trucks -- none of which are powered by electric drivetrains today. One frequently quoted (though dated) study from the Government Accountability Office concluded that although a single five-axle tractor trailer loaded to 80,000 pounds weighs only as much as 20 cars, it causes as much road damage as 9,600 cars. Federal and state gas taxes are regressive in general; they do not fairly allocate the cost of maintaining critical infrastructure to those who are responsible for those costs. But allocating extra costs to EV drivers isn’t logical.

Disproportionate Fee Structure

Third, the fees are just too high. The Federal Highway Administration estimates that the average U.S. resident drives 13,500 miles per year. And according to the U.S. Bureau of Transportation Statistics, the average fuel efficiency of a new passenger car in model year 2017 (the latest available) was 39.4 miles per gallon. So a driver who chooses to purchase a gasoline-powered sedan will typically pay $132 in gas taxes to the state of Ohio every year. But if that same driver buys an all-electric Nissan Leaf, she will pay $215 in extra taxes and fees -- over 60% more.

The Greater Good

Finally, arithmetic aside, electric vehicles are good for Ohio. They are creating jobs and driving investment to our state. They are quiet and fun to drive. They contribute no sulfur dioxide or nitrogen oxides to our air, making it easier to breathe on hot summer afternoons and cold winter mornings, and lowering the cost of compliance with clean air standards. Usually, we’d expect government to use its policy-making power to foster markets for innovative technology with societal benefits. If the Ohio General Assembly does not wish to encourage Ohioans to adopt electric vehicles, fine -- but the least legislators can do is to avoid stifling this market with punitive and illogical fees.

Long-term, we need to find a different way to pay for our highways and roads. The current system is unfair and regressive, and must be phased out anyway as our nation’s vehicle fleet electrifies. Disappointingly, the Ohio General Assembly and Governor DeWine missed a golden opportunity last month to repeal these punitive, regressive fees in Ohio’s biennial transportation budget.

Adopting a mileage tax, rather than a gasoline tax, could be part of the solution, as long as those rates are adjusted for vehicle class and weight. Alternatively, highway maintenance could be funded exclusively from general revenues, replacing a flat tax that hits poorer folk hardest with an income tax that is designed to collect most from those who can afford it.

In the meantime, in Ohio, state lawmakers should proactively repeal or significantly reduce EV and hybrid registration fees. They need not wait for the next budget cycle to do so.