Texas will impose additional fees for the registration of electric vehicles beginning next month.
A new state law that goes into effect September 1 will require EV owners to pay an initial registration fee and an annual renewal fee.
According to a 2020 study by the Texas Department of Transportation (TxDOT), Texas loses roughly $200 per year in state and federal gasoline tax collection for every new EV that displaces a conventional gas-powered vehicle.
To address the loss of these taxes, state lawmakers in March approved Senate Bill 505, which establishes a $400 registration fee for new EVs and an annual renewal fee of $200 thereafter.
The registration-based fee is “the most straightforward” solution to the loss of tax revenue and closely aligns with existing collection methods, TxDOT said in the study.
Texas EV owners were not previously required to contribute to the state highway fund, which is generated from motor fuel taxes to cover road construction and repairs across Texas, according to Sen. Robert Nichols (R-Jacksonville), the author of SB 505.
“We recognized some time ago that each time an all-electric vehicle does get on the road and displaces a gasoline or diesel vehicle that the state highway fund loses money,” said Nichols, per KXAN.
By establishing SB 505, Nichols argues Texas will be better positioned to identify how much state and federal taxpayer funding is lost due to the displacement of conventional vehicles.
“The bill does not fully compensate for declining gasoline tax revenue. Other factors that affect gas tax collection include inflation and fuel efficiency,” Nichols told The Dallas Express.
“The gas tax is not fixed to inflation, so the purchasing power has eroded significantly over the past several decades. Gas tax rates are also frozen by the legislature,” he said. “Additionally, steady improvements to the fuel efficiency of gas-powered vehicles and the increase in popularity of electric vehicles have placed pressure on gas tax revenues and eroded collections.”
Beginning in September, Texas will join more than 30 other states that also require a special registration fee for EVs, according to a report by the National Conference of State Legislatures (NCSL).
“While EVs still represent a small portion of all light-duty car sales in the United States, as sales increase, some states are concerned increased EV adoption will lower gasoline tax revenues that have already been declining as vehicles become more efficient over the years,” said NCSL in its report.
“Repairs and improvements to the nation’s highways traditionally have been funded primarily through federal and state taxes collected at the pump. Because EVs do not require gasoline, they do not contribute to the upkeep of highways through the gas tax,” the association explained.
While the majority of states have pushed for EV tax collection through registration and renewal fees, some see the policy as counterintuitive.
“Consumers should not be punished for choosing a cleaner, greener car that saves them money on fuel and maintenance,” said Dylan Jaff, policy analyst at Consumer Reports, in a press release. “The fees proposed in this bill will establish an inequitable fee scale for EV owners, and will not provide a viable solution to the long-standing issue of road funding revenue.”