2 of 13

With the gas tax diminishing in value with each passing year, state lawmakers from across the country are eyeing electric vehicles to make up for lost revenue.

We recognize that EVs and ICE vehicles drive on the same roads, and they should be paying for their use of the roadway. However, EVs are not the culprit for lost gas tax revenue, and they are not the sole solution. Punitive EV fees threaten our electric transportation future, and we must act now to ensure the system is fair for drivers.

We also recognize that EVs are not the sole culprit eroding transportation funding. The gas tax has been diminishing in value for two decades as fuel efficiency has increased and cars use less fuel.

These developments, especially improved vehicle fuel economy in the past decade, have already led to a 20% decline in gasoline consumption per mile driven since 2010 and are expected to lead to a further decline of 50% by 2040.

For one, as of March 2023, there are roughly 67,500 EVs registered in Pennsylvania (43,700 BEVs & 23,800 PHEVs). If a flat $290 annual fee were to be implemented on all EV drivers in the state tomorrow, it would raise roughly $19.5 million this year. That is not an amount to scoff at but, again, PennDOT estimates it requires more than $9.3 billion a year in additional funding for our roadway system. Therefore, EVs are a piece of a much larger puzzle regarding alternative funding sources, not the sole solution.

3 of 13

Terminology

BEV: Battery electric vehicle

PHEV: Plug-in hybrid electric vehicle

ICE vehicle: Internal combustion engine vehicle

BIL: Bipartisan infrastructure law

IRA: Inflation Reduction Act

MPGe: Miles per gallon equivalent

4 of 13

The EV moment is here, let’s drive it forward!

Electrification Advisor

Bloomberg American Cities Climate Challenge

Project Lead

Drive Electric Northern Colorado�Drive Electric Orlando

Pilot Program Leader

Freight and Goods Delivery Electrification

N.C. Clean Energy Technology Center (NCCETC) The 50 States of Electric Vehicles

In 49 states plus D.C. and Puerto Rico - 621 EV actions were taken in just Q1 of 2023

PA received $171.5 million as a part of the National Electric Vehicle Infrastructure (NEVI) Program

EV actions taken:

“the greatest number of actions relating to rebate and grant programs; registration, mileage, or charging fees for electric vehicles; planning activities; and state procurement of electric vehicles. States also continued to take actions planning for National Electric Vehicle Infrastructure (NEVI) program funding distribution.”
States across the country are searching for alternative funding solutions, including road usage charges (i.e., tolling, congestion pricing, mileage-based fees), increased registration fees, and additional fuel taxes. These solutions are applicable not just to EVs, but to all vehicles on the roads. We find ourselves at a crossroads for the future of infrastructure funding. Many states are discussing EV fees just like we are here in Pennsylvania, including discussions happening at the federal level (see IIJA Sec. 13002: National Motor Vehicle Per-Mile User Fee Pilot) as a part of the IIJA’s research, technology, and education section.

5 of 13

Background

Pennsylvania’s roads received a “C-” rating by the American Society of Civil Engineers

Roughly 9,600 miles of pavement in poor condition
2,500 bridges need repair

PennDOT needs more than $9.3 billion in additional funding to maintain roads and bridges

Pennsylvania will receive at least $13.2 billion in funding from the BIL and IRA over the next 5 years

FY22 received ~$2.1B
FY23 expected ~$2.2 B

6 of 13

States with Fee Proposals

Georgia
Pennsylvania
Indiana
Kansas
Michigan
Minnesota
Mississippi
Montana
Nebraska
New Mexico
New Hampshire
North Carolina
North Dakota
Tennessee
Texas
Utah
Wyoming

7 of 13

What is fair?

Fair and equitable to index to the state gas tax

PA gas tax $0.61/ gallon – roughly $290/year – and $0.024/mile

Should account for the health and environmental savings associated with EVs

Biggest factors: Distance and Weight

State Gas Tax Rate / Average MPGe of Light-Duty EVs = Average Per-Mile EV Tax Rate for LDVs

Double taxation on PHEVs

Index it to the state gas tax. PA has the highest state gas tax, rivaled only by CA, so it would make sense why the state would have a higher EV fee/tax as well.
At the current $0.61/gallon that PA ICE and hybrid vehicle drivers pay into the gas tax with an average yearly tax of about $290 or roughly $0.024/mile
BUT this doesn’t account for the health and environmental savings that EVs bring, with the American Lung Association found that zero-emission transportation implementation would provide Pennsylvania $86.8 billion in public health benefits from 2020-2050. An EV fee could reflect these savings via the inclusion of miles-per-gallon equivalency (MPGe) ratings in the final equation. I strongly recommend further research into constructing a fee structure that takes this into account.
By utilizing MPGe ratings, the final tax formula (referenced below) would take into account the clean air quality benefits from EVs – both BEV and PHEVs – and factor them in accordingly. Additionally, it would provide an option to tax vehicles by class or weight within the light-duty sector. For example, taxing a Chevrolet Bolt and a GMC Hummer EV at different rates would make a fee more comparable to the gas tax by accounting for variations in vehicle weight – as we know weight results in different amounts of gasoline consumption for ICE vehicles. However, including weight as a criterion would likely raise considerable concern from the freight and shipping sector and could cause higher prices on product and goods delivery if the fees are passed back to consumers.
PHEVs also raise some unique questions in this discussion, as they run on both electricity and gasoline. Some have estimated that PHEVs drivers travel 80% of their miles in electric mode. However, that is assuming the driver starts each trip with a fully charged battery – which is rarely the case. While the industry continues to study PHEVs electric versus gas usage, data collected by Electrek shows that “PHEVs spend 26-56% less time in all-electric drive mode… and therefore consume 42-67% more fuel than EPA labeling suggests.” It is imperative that more research is done on PHEVs prior to levying a fee or we run the risk of double taxation.

8 of 13

Proposals: Pennsylvania

Currently two proposals in the General Assembly:

HB 85 [Rep. Irvin] – proposed pilot for BEVs & PHEVs

BEVs: $0.031/mile or $265 annually
PHEVs: $0.025/mile or $214

SB 656 [Senator Rothman] – Fee on EVs & commercial EVs + eliminates the alternative fuels tax (a per kWh tax on charging)

“Noncommercial” (26,000 lbs -) EVs: $380 annually
“Commercial” (26,001 lbs +) EVs: $450 annually

Short-term, small-scale “solutions” can harm in the long term
It’s tempting for lawmakers to pass an EV VMT fee quickly; capitalize on an untapped revenue source, message it as equitable, and get a quick infusion of cash (no matter the amount).

However, at current registration rates, EV-specific VMT fees would raise an almost minuscule amount of funding when looking at the overall infrastructure deficit.
For PA, $200/year from the 40,500 BEV drivers on the road would raise ~$8.1 million. All the while, PennDOT states they have a $9.3 BILLION deficit to maintain a system of good repair.

BEV and PHEV drivers do pay electric tax - it's on the electric bill as a standard charge
PHEV drivers taxed twice
It is important to note that EV drivers do pay taxes that may support road construction and maintenance, as well as other taxes that support other goals (such as higher sales tax on vehicle purchases, registration fees, tire taxes, etc.)
Levying an inequitable, punitive fee on EVs not only burdens current drivers but hurts future EV adoption. And by harming EV adoption today, you severely limit the revenue-generating potential of the tax.
EV VMT is particularly burdensome for low-income customers as it is generally collected annually, and low-income drivers do not have lump sum available to pay; low-income drivers generally live further away from workplaces as well and drive further

9 of 13

What are other states doing?

31 states have enacted annual registration surcharges on EVs, ranging from $50 to $230

Over 30 states have researched some form of road usage charges or per-mile fees on light-duty vehicles

10 states have completed pilot tests
3 operation programs (Oregon, Utah, and Virginia)

Iowa, Oklahoma, and Kentucky enacted taxes on electricity consumed at public chargers

Unlike fuel taxes, flat fees do not correlate with road usage, but they are relatively simple to administer if collected along with other vehicle registration fees. These EV surcharges generate little revenue today but are expected to grow over time as the number of registered EVs grows.

- Georgia and Alaska levying the highest on EV drivers.

To preserve the usage-based principle of the motor fuel tax, over 30 states have researched road usage charges (RUCs), or per-mile fees, on light-duty vehicles, with 10 states completing pilot tests and three (Oregon, Utah, and Virginia) enacting operational programs.

The operational programs all offer vehicle owners a choice between (1) paying a flat annual registration surcharge or (2) reporting miles driven and paying

by the mile. Motorists can report miles driven in several ways, ranging from self-reporting of odometer readings to using in-vehicle technology

that wirelessly reports miles driven.

Issues that arise with this are determining miles driven outside of the state and privacy concerns around any in-vehicle technology

Approximately 15% of electric vehicle charging occurs. The first of these tax programs will go live in 2023. These three states designed the public charging station tax to mimic fuel taxes on out-of-state vehicles using their roads while implementing a flat annual registration surcharge on in-state vehicles.

Oklahoma has established a RUC task force in parallel with its registration surcharge and electricity tax on out-of-state vehicles to explore and pilot per-mile fees.

10 of 13

Possible Solutions

Method 1: Total electric miles driven, total gas miles driven and weight based on vehicle class, not type (i.e. ICE vs. BEV). Take state gas tax and divide by the average MPGe of vehicles on the road in that class

PA $0.61/gallon / 25mpg = $0.024 per mile
Pros: Creates a fair, equitable, and comperable fee to that of ICE vehicle drivers
Cons: Out of state usage and small fleet bussineses

Method 2: Charge customers per kWh when charging

Pros: Easier to implement at public charging stations, generates continuous revenue based on road usage, relatively simple collection process compared to VMT fees/MBUFs/RUCs, captures out-of-state travelers’ road usage
Cons: Taxing home charging would require separate meters or submeters, adding significant costs on the consumer to install. Separate meters: total cost anywhere from $1,800 to $2,500.

Method 3: Flat registration fee

Pros: Creates a revenue source that will only increase with adoption
Cons: Does not capture out of state driver road usage, negative impact on adoption hurts the fee program and lower-income drivers

We agree, all vehicles should pay for their use of the roadway. With the gas tax diminishing in value, mileage-based fees stand as a viable funding alternative for transportation infrastructure.
Any road usage charge program should be kept simple and easy to understand.
Additionally and more importantly the tax needs to be fair and should be comparable with current ICE fuel taxes.
Method 1: The criteria for determining the annual fees should be as follows: total electric miles driven, total gas miles driven and weight based on vehicle class, not type (i.e. ICE vs. BEV).

The final formula for VMT would therefore take into account the clean air quality benefits from EVs – both BEV and PHEV.
Cons: Depending on how a proposal is written, there are plenty of smaller fleet vehicles that would be impacted by the fees, including the monetary costs and administrative procedures that come with collecting mileage information.
Rental companies have cars registered across the country and their vehicles can be found throughout. Does the company pass the cost onto its customers? Does the company place an additional surcharge on EV rentals in PA to cover the tax? Furthermore, say a rental company has 5,000 EVs registered in Pennsylvania. But, the vehicles are distributed across Pennsylvania, New York, New Jersey, Ohio, Maryland, Delaware, and even Florida. Does the technology exist and does the proposed program allow for vehicles to account for miles driven within Pennsylvania versus other states?

Method 2:

Submeters: CA PUC is the first and only in the nation so far to allow EV owners to measure an EV’s energy use independently from the owner’s main utility meter through submetering; costs for the unit range$400-500, cheaper to install
Proposal in Wyoming would tax electricity at $0.15/kWh for both commercial and residential charging

11 of 13

EC Messaging Strategy

Editorials, LTEs, & Grassroots Messaging

Identify problems

Double taxation
Inequitable & punitive
Admin & implementation barriers (i.e., costs, collection, testing)
Who is taxed, what charging levels?
Lack of education and clarification on the implications of legislation (state agencies getting up to speed on new processes)

Exemplify that decisions should not, and cannot, be rushed.

12 of 13

Take Action!

Tell your lawmakers to not tax EV owners unfairly!

Punitive taxation harms EV adoption and harms Pennsylvanians.

Pennsylvania, Don't Tax EV Owners Unfairly! (actionnetwork.org)

13 of 13

Feel free to Contact us!

Max Turner – Campaigns Organizer

mturner@electrificationcoalition.org

Nick Miller – Policy Analyst

nmiller@electrificationcoalition.org