Extras on Excise: Electric Vehicles – High Mileage Cream Puffs or Freeloading Road Hogs?


As environmentalists and car purchasers push for greater fuel economy and sustainable energy usage, more and more motor vehicles are built to run longer on less  fuel, or none at all. That’s great for the environment but could mean a dry spell for state highway fund that rely on motor fuel taxes and fees. 

In the United States alone approximately 133 billion gallons of gasoline were consumed in 2012.

The U.S total state and federal average tax on gasoline is $0.4972 per gallon. This would provide annual tax revenue of approximately $66 billion nationwide.

Before these taxes are even imposed the manufacturing and distribution of fuel involves several layers of fees. These include severance fees, underground storage tank fees, and environmental fees, which could be very high depending on the state in which the fuel supplier is operating.

While the cost of fuel increases, so does consumer demand for  motor vehicles that use less gas.

But no matter how beneficial electric motor vehicles are to consumers and the environment, they still use the roadways. This has states struggling with whether or how best to make owners of these cars shouldering their share of the burden of paying for the highway system’s upkeep.

In the future owners of electric vehicles could face higher registration fees or special excise taxes to offset their thrifty habits at the pump.

Both North Carolina and Washington state impose a $100 fee on electric vehicles, while Nebraska’s electric vehicle fee is $75.

Most recently Virginia repealed the imposition of its $64 license fee on hybrid vehicles, but the tax remains in effect for other electric cars. In addition, electric cars licensed in the state will be subject to an additional license fee of $50.

The idea of new fees aimed at electronic vehicles is likely to send a mixed message to consumers, who will need to balance them against numerous incentives. 

Every purchaser of an electric vehicle stands the chance to qualify for a federal tax credit of $7,500, depending on the taxpayer’s income as well as other factors.

In Maryland, a plug-in car purchaser may be eligible for a one-time excise tax credit of $600 to $1,000, which will depends on the vehicle battery capacity. The credit is effective July 1, 2013 through June 30, 2014.

California’s Clean Vehicle Rebate Project (CVRP) offers a purchaser of an electric vehicle a $2,500 rebate.

Georgia offers an income tax credit of up to $5,000 for qualifying electric vehicle purchases.

In Virginia, alternative fuel vehicles (AFV’s) that display a Virginia Clean Special Fuel license plate may use the state’s high-occupancy vehicle lanes even while driving alone.

Also, several states offer a tax credit of up to $75 dollars for individuals who install dedicated EV charging outlets in their home.

Continue the discussion on the Bloomberg BNA State Tax group on LinkedIn: Do the fuel-efficient vehicle fee “sticks” outweigh the fuel-efficient vehicle tax incentive “carrots?”

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