Electric Vehicles: The Impacts on State Taxes & Road Maintenance

Electric Vehicles (EVs) are quickly becoming a popular alternative to traditional gas vehicles, and while they offer a range of benefits to the environment and consumers, they are also having an unplanned impact on the revenue generated through federal and state gas taxes that are traditionally used to fund road maintenance and infrastructure projects. This shift in transportation trends is posing a challenge to many states that rely heavily on gas taxes to fund their infrastructure.

Gas taxes have historically been the primary source of funding for road maintenance projects in the United States. However, with more people turning to electric vehicles, the revenue generated from gas taxes is decreasing, leaving state governments with less funding to maintain their roads and bridges. According to a report by the Institute on Taxation and Economic Policy (ITEP), the 50 states collectively lost an estimated $7.3 billion in revenue due to the reduced usage of gas in 2020 alone.

Some states are feeling the impact of this revenue loss more than others. Current data shows that California has the highest number of electric vehicles in the country, and as a result, it has seen a significant drop in gas tax revenues. The state's gas tax revenue declined by nearly $1.5 billion between 2013 and 2018 due to the increased use of electric vehicles.

Other states, such as Washington, Colorado, and Oregon, are also seeing a decline in gas tax revenues due to the growing popularity of electric vehicles. The situation is likely to worsen in the coming years as the number of electric vehicles on the road continues to increase.

To offset this revenue loss, some states are exploring alternative ways to fund their infrastructure projects. One such initiative is a road usage charge (RUC), which is a fee based on the number of miles a vehicle travels. This fee is collected electronically and is designed to be a more equitable way to fund road maintenance projects since it charges drivers based on their actual usage of the roads rather than the amount of gasoline they consume.

Oregon was the first state in the country to implement a road usage charge program, and other states, including California, Utah, and Colorado, are currently exploring similar initiatives. However, implementing a road usage charge program comes with its own set of challenges, including the need for new technology to track mileage and concerns about privacy.

Another initiative some states are considering is an electric vehicle fee, which would require electric vehicle owners to pay an annual fee to help fund road maintenance projects. Several states, including Colorado and Wyoming, have already implemented this type of fee. Most recently the Texas legislature just passed Senate Bill 505 with unanimous support, which would require EV owners to pay an annual $200 fee to register their cars.

The continued popularity of electric vehicles is having a significant impact on the revenue generated through gas taxes, leaving states with less funding to maintain their infrastructure. While initiatives like road usage charges and electric vehicle fees offer a potential solution, these alternatives come with their own set of challenges and may take time to implement effectively.