Texas lawmakers may consider new electric vehicle fee

With increased attention to electric vehicles (EVs) nationwide, including recent federal action to extend and revise tax credits for consumers who buy them, Texas lawmakers have considered how growing use of EVs will affect the funding of Texas highways.

Congress recently extended the federal tax credit for electric vehicles, with certain new requirements, for another decade and eliminated the cap on the number of vehicles eligible for the credit. The federal government also has indicated plans to distribute billions of dollars for EV-charging infrastructure expansion over the next five years.

While hybrid and electric vehicles remain a small percentage of all vehicles in Texas, their numbers have increased significantly in the state in recent years, according to 2021 data reported by the Texas Department of Motor Vehicles. Hybrids still make up the majority of alternatively fueled vehicles (AFVs) in Texas, but the smaller number and percentage of fully electric vehicles has grown rapidly since 2016.

With federal and state gas taxes serving as main sources of funding for building and maintaining Texas highways, the Transportation committees of both the Texas House and Texas Senate were charged this interim with recommending a revenue method for AFVs equivalent to the taxes paid at the pump by drivers of gasoline- and diesel-powered vehicles.

SB 1728 by Schwertner, a bill that would have established an equalization fee for electric vehicles, passed the Texas Senate last year in the regular session of the 87th Legislature but died in the House on a point of order. The bill passed by the Senate would have imposed a fee of $200 on electric vehicles weighing up to 6,000 pounds and $250 on those weighing between 6,000 and 10,000 pounds. For the same weight categories, hybrid vehicles would have incurred fees of $40 and $50 respectively. The $200 dollar fee that would have applied to most EVs was based on a state report required under SB 604, enacted in 2019 by the 86th Legislature. The report estimated that the state loses about $100 in gas taxes for every fully electric vehicle, along with a similar loss in federal gas taxes.

Some critics of the fees proposed under SB 1728 said that while electric vehicle owners should contribute to the maintenance of Texas highways, the proposed fee amounts were too high to be proportionate to EVs’ impact on state finances and would discourage Texans from buying electric vehicles at a time when a transition to less reliance on fossil fuels is needed. They said a state fee closer to $100 for most electric vehicles would be more fair and that the federal government could impose its own equalization fee in the near future. Other critics said fees based on miles traveled per year would be a better alternative to a set fee. This type of annual mileage fee was added to the House committee substitute for SB 1728 as an alternative to the set fee before a point of order killed the bill on the House floor.

The House and Senate Transportation committees addressed the interim charges on electric vehicle fees in public hearings on April 26 and May 3, respectively. Debate continued about whether a fixed fee or annual mileage fee would be the best policy solution. Some stakeholders reiterated concerns about a flat fee, saying a miles traveled fee was more fair and comparable to gas taxes for conventional vehicles. Others said that while a mileage-based fee schedule would have the advantage of corresponding directly to the use of vehicles on roads, it would impose a higher administrative burden than a set fee.

By Luke Landtroop

For more on alternatively fueled vehicles in Texas, see previous Interim News Briefs post, Texas to study additional fees on electric and hybrid vehicles.

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