While the legislature considers transportation funding options, there is an ongoing debate about whether EV drivers pay their fair share for road maintenance. The truth is: EV drivers are already contributing to road funding, and Michigan can’t afford to charge EV drivers more.
The “EV Tax” – How EV Drivers Pay for the Roads
Battery electric vehicle (BEV) owners pay an additional $160 fee when registering their vehicles. This fee is specifically designed to compensate for EVs not paying gas taxes, which help fund road infrastructure. This EV Tax is paid with a vehicle’s annual registration fee. It is tied to the gas tax so that the EV Tax increases when the gas tax increases. In the current statute, the formula has a ratio of $5 in EV Tax for every 1 cent of gas tax.
Michigan’s current gas tax is 31 cents per gallon, and the EV tax is $160.
Comparing EV and Gas Driver Contributions
Consider an average new internal combustion engine (ICE) car: With a fuel efficiency of 28 miles per gallon and an annual driving distance of 14,000 miles, it consumes about 500 gallons of gasoline annually. At Michigan’s current gas tax rate of 31 cents per gallon, this driver pays $155 annually in gas taxes— $5 less than an EV driver.
This example leaves out a few key metrics that further penalize EV drivers, too:
- Michigan’s registration fee is designed to charge owners of more expensive vehicles more. Since EVs are typically more expensive than their gasoline counterparts, their owners pay even higher registration fees. This results in a double penalty for EV drivers, who pay the additional $160 fee and more in registration costs due to their vehicle’s higher value.
- EV drivers tend to drive fewer miles than the average gas driver, too. A typical EV driver might only drive about 10,000 miles per year, but they pay the same amount as a driver who uses the roads more often.
- Gas vehicle drivers get a gas tax benefit from driving more efficient vehicles; the less fuel their vehicle consumes per mile, the less they pay in gas tax. EV drivers get no similar benefit for driving the most efficient cars.
Proposals that increase the EV Tax would hurt Michigan’s economic growth
Our state has positioned itself as a national leader in clean mobility, and adding additional financial burdens on EV owners could discourage adoption, slow industry growth, and put Michigan at a competitive disadvantage.
Because of the way the EV Tax is currently calculated, any proposals to increase the gas tax will be felt by EV drivers in their annual registration fee. Proposals to “swap” the sales tax on gasoline for an additional gas tax will hold gas drivers harmless, while increasing the already high EV Tax.
Instead, policymakers should focus on equitable and forward-thinking road funding solutions that ensure all drivers contribute fairly without discouraging the innovation driving our state forward. In doing so, we can maintain our roads while building a thriving, clean mobility industry that benefits our economy, communities, and future.
