Paying Their Fair Share

November 6, 2019

The Problem with Michigan’s EV Road Funding Fees and Potential Solutions 

Michigan’s 2015 transportation funding legislation sought to address the state’s road funding woes by raising fuel taxes, vehicle registration fees, and making transfers from the general fund. For plug-in electric vehicle drivers, the law also introduced new annual surcharges on registration fees at $30 for plug-in hybrid electric vehicles (PHEVs) and $100 for all-electric EVs. An additional fee is charged to these drivers based on an escalating formula tied to each increase of one cent in the state gas tax above its original $0.19 level. As of 2017, this means that PHEV drivers pay an additional fee of $47.50 and EV drivers pay an additional $135. When combined with the value based (ad valorem) fee that every owner pays when registering their vehicles, plug-in vehicle drivers are now paying between $300 and $390 in up-front fees.

The result of these new fees is that PHEVs and EVs pay significantly more in annual transportation-related taxes than comparable gasoline vehicles. As shown in Figures 1 and 2, the most popular plug-in hybrid models pay between $20 and $70 more, while full-electric models pay between $90 and $160 more than their internal combustion engine (ICE) counterparts. These fees are as much as 30% higher for PHEVs and 67% higher for EVs than comparable ICE vehicles under today’s transportation taxes. This disparity will continue to grow if gas taxes are increased beyond current rates.

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