QUESTION: My question is with the increasing popularity of electric vehicles, how are the drivers of these vehicles paying a road use tax? I know the price for a gallon of gasoline includes a road use tax that goes toward paying for roads and have been wondering how electric cars are being taxed.
ANSWER: This is an issue that states across the country have addressed or are considering taking steps to address. In fact, Texas legislators unsuccessfully tried to pass a new law this year that would have established special fees for vehicles fueled by something other than gasoline, such as a hybrid electrical vehicle or natural gas vehicle.
The state comptroller’s office said in 2018 that the state’s motor fuels tax brought the state $3.7 billion in revenue. (A separate tax applies to vehicles that run on compressed natural gas and liquefied natural gas.)
“The majority of our motor fuels tax revenue is used for transportation projects. In Texas, gasoline and diesel fuel are subject to a 20-cent tax per gallon. In addition, the federal government imposes taxes of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel,” information on the comptroller’s website says.
Already the motor fuels tax isn’t supplying enough revenue to keep up with the road projects the state needs, the comptroller’s office said.
“Since 1990, Texas’ population has risen by 55 percent while Texans’ average daily vehicle miles traveled have increased by 70 percent. TxDOT’s transportation plan estimates the state’s population will rise to 45 million by 2040, putting further strains on an already overburdened road infrastructure,” the comptroller’s office website states.
According to the U.S. Energy Information Administration, the amount of gasoline used annually by Texas’ entire transportation sector (including rail, air and marine uses as well as autos) rose by 49 percent between 1997 and 2016, to 329 million barrels. Its use of diesel and other distillate fuels rose by 96 percent in the same period. Texas’ annual growth rate for gasoline consumption has surpassed that of the nation as a whole in every year since 2005.”
However, “After adjusting for inflation ... Texas’ motor fuels tax revenue has actually declined during the last two decades.”
Hybrid and all-electric cars made up about 1% of the 24.6 million registered vehicles in 2018 in Texas, but projections estimate they will account for 18% of cars and trucks and 11% of commercial vehicles by 2040.
That National Conference of State Legislators reported many states are facing declining gas tax revenue, and 30 have adopted special fees for “plug-in electric vehicles,” and 14 have special fees for “plug-in hybrid vehicles.” Some states have adopted fees for vehicle miles traveled and mileage-based user fees.
Keep in mind there are a variety of hybrid and electric vehicles. Some are all electric with a rechargeable battery, and some are able to switch to gasoline if their rechargeable battery runs out of juice.