Taxes paid by EV’s and gas cars – Click to Enlarge
Several states have proposed taxes for Electric Vehicles like the Nissan LEAF. The motivation to introduce these new taxes is based upon the fact that 100% electric vehicles use no gasoline so pay no tax per gallon of gas. The gas tax is meant to pay for road maintenance, so the argument goes that the EV owner needs to be taxed differently in order to restore parity and fairness, otherwise there will be no money to repair the roads as EV’s make up a larger percentage of total vehicles on the road.
Some of the tax proposals are as follows.
- Arizona – EV’s taxed at 1.43c per mile driven. House Bill 2257 introduced by representative Steve Farley (D-AZ)
- Washington State – $100 per year additional tag fee. SB 5251 sponsored by senators Haugen, Swecker, Sheldon, Hobbs, White.
- Kansas – up to 1c per kWh used for charging an EV, proposed by Representative Tom Sloan (R-KS)
Taxes paid if proposals become law – click to enlarge
While it seems only fair that EV owners pay the same amount of taxes to the state to help maintain the roads I decided to run the numbers and see how much money each state gets from gas car drivers and EV drivers based on 13,000 miles per year and an expected car life of 11 years. It is quite illuminating, in all states mentioned (except Washington state) the state government will get more taxes from a Nissan LEAF owner vs a fully loaded Nissan Versa without the introduction of any further taxation.
How can that be ?!? This is as a direct result of increased sales tax revenue. EV’s are twice as expensive a similarly sized and equipped gasoline vehicle. EV owners pay considerably more state sales taxes up front which more than compensates for the loss of gasoline taxes. The proposed EV taxes make the inequity even worse for the EV owner. To see how I came to these numbers feel free to download my spreadsheet. I included Tennessee (the state I live in) as a comparison, there are no EV specific tax proposals in Tennessee that I am aware of.
It does appear that Washington State have proposed a bill that is easily enforced and will level the playing field fairly. Washington State have waived sales taxes on EV’s as an incentive, so can and should justifiably get road repair monies through straightforward fees utilizing existing tax administration and collection methods. The Arizona’s and Kansas proposals will be difficult to enforce, require new methods of administering and collecting taxes, and seem to be less practical pieces of legislation overall.
With just 20,000 EV’s on US roads vs 250 million gasoline vehicles, EV’s represent 0.008% of all vehicles on the road as of December 2011. One wonders why the state legislators are so keen to introduce new taxes at this early stage. It’s election year. Some representatives may want to appear to be against Obama’s green incentives, and appeal to anti-Obama sentiments in order to get more votes.
Sloan’s proposal would increase the tax burden of a Nissan LEAF owner by up to $5,000 more as result of this proposal. Currently a LEAF owner stands to pay $300 more than a Nissan Versa purchaser. Why tip the scale even further?
GM spokesperson Lindsay Douglas has openly criticized Representative Sloan, saying
“…..why would we want to continue supporting this technology and pushing forward if what we’re being told is, we’re going to tax this to its death before it gets a chance to survive?” questioned Douglas.
Here’s what Representative Sloan is quoted as saying.
“I believe that such vehicles should pay the equivalent of the motor fuels tax so that they do not “ride free” when gasoline/diesel vehicles pay to maintain the system,” said Sloane.
Clearly Sloan hasn’t figured in double the sales tax revenues LEAF and Volt owners pay into the state coffers. Note I didn’t figure in the sales use tax collected when the vehicle changes hands, which will happen. EV’s are more expensive so use tax from resale of vehicles will stoke the state’s coffers even more.
Showing soon in movie theaters near you – “Who killed the electric car? – The Sequel”
Update: 2013-01-07 I have learned that Oregon want to introduce a 2c per mile tax on EV drivers. They have no sales tax in Oregon so I did the math quickly by updating my spreadsheet. They stand to double their tax revenue on EV drivers vs Gasoline drivers, and introduce a new tax collection system that will cost extra money to administer. They should take Washington States lead and simply tax a flat fee at annual registration time. $122 per year would be fair in Oregon.
Tesla Model 3 
News to me, so I’m really glad I stopped by. Good post. Who killed the electric car sequel coming soon – yes.
What this article doesn’t mention is that EV cars are so much lighter that less money should go into repairing the highways if more EVs were used. The gas guzzlers are the ones breaking the pavement. So the new taxation of EV is even futher unjustified.
A Nissan LEAF weighs more than Versa, as compact car it weighs as much as a mid size vehicle thanks to over 600 Lbs in batteries. So I don’t buy your argument totally. Gas taxes don’t discriminate based upon weight of the vehicle (which is a flaw in the system), simply the amount of gas purchased.
I do agree that full size Trucks and SUV’s will do more damage to the road, but since they are gas guzzlers they are contributing more to the road repair slush fund.
You also didn’t mention the sales tax that Arizona EV owners pay on their electricity. If I’m reading the APS website correctly, someone living in Phoenix pays 12% in state and local taxes on their utilities. Depending on how much electricity they use, they are probably paying around $.02/kWh on their marginal usage. I get around 3.5 miles/kWh during the summer here in TN so I would already be paying 1/2 cent per mile in taxes. According to the AZ DOR website, the state transportation tax on gasoline is $.18/gallon, so a Leaf owner would already be paying state taxes on their electricity equivalent to what a 36mpg car owner would be paying. The other thing that really chafes me about the AZ proposal is how it really penalizes the Leaf for being efficient. At $.0143/mile, they are taxing EVs at the same rate as cars that get 12.5mpg. Is it really fair to suggest that the Leaf causes as much wear on the roads as a Hummer H1? Hell, even a Suburban gets 17mpg combined per the DOE. When you combine the sales tax on electricity with the proposed mileage tax, EVs could be charged $.02/mile, which means they are paying the same taxes as a 9mpg vehicle. Now we’re in cargo truck territory. Where’s the proposal to refund sales tax on electricity to charge EVs, since there’s no sales tax on gas?
Of the three proposals above, I think the most fair is actually the per kWh tax, although I think it needs to be calibrated to the gas tax so that equivalent class cars pay equivalent taxes. At least with a per kWh tax, like with a gas tax, heavier vehicles will tend to pay more because they use more. I don’t like the Washington flat tax because it penalizes drivers with low mileage. Plus, they don’t exactly use a conservative estimate: a 50mpg Prius owner driving 12K miles/year only pays $90.
One other comment about something I learned while looking up numbers for the above calculations: I will try to gripe less about the 9.25% sales tax here in Nashville. Phoenix pays 10% sales tax AND there’s an income tax of up to 4.5%! I have a feeling that that’s what happens when you adopt a state income tax. The sales tax probably goes down initially but then creeps right back up there.
Tax on utilities eh? Wow that is sticking it to the residents of AZ isn’t it?
That makes the tax proposal in that state definitely anti-electric with EV drivers paying far more than their fair share.
The states should also take into account that EV’s do not create pollution in the cities. For this, EV drive would deserve a tax break, or the gasoline-powered care should get a tax for the pollution damage they do.
You can add North Carolina to your list now ($100 annual fee, car sales tax is 3%): http://www.newsobserver.com/2014/01/10/3522102/in-place-of-gas-taxes-nc-electric.html
To add to your argument:
1. We overpay for property taxes in NC on the Nissan Leaf because the tax value assessed does not reflect the actual market value, which is $7,500 lower than the purchase price due to the federal tax credit.
2. We only drive the Nissan Leaf around town as it has limited range. The local roads are paid mostly with local taxes. When we go on longer trips on state highways, we take the gas car and still pay state gas taxes.
3. North Carolina has a $2-billion per year shortfall in highway funds, and this EV “fee” (tax) will collect about $160k this year. Sounds like identity politics, and I don’t like being targeted.