Should electric vehicle owners pay higher fees to help fund state roads?

LANSING — Automakers are pushing back against proposed higher state registration fees for alternative-fuel powered cars.

The extra fees — $30 for hybrids and $100 for electric vehicles — would go toward a nearly $1.5 billion road funding plan and are being portrayed as a tax fairness measure since alternative-fuel vehicles use less gasoline and so their owners pay fewer gas taxes.

But automakers, racing to meet more rigorous federal fuel-economy standards, have concerns the fees will discourage would-be buyers of the fuel-efficient vehicles in a still-developing market.

In a letter last month to state Senate Majority Leader Arlan Meekhof, the Washington, D.C.-based Alliance of Automobile Manufacturers said lawmakers should be offering incentives to buyers rather than raising fees. The alliance represents a dozen global automakers, including the Detroit 3.

“Public policies that negatively differentiate advanced technology vehicles — such as electric and hybrid vehicles — discourage consumers from adopting these new technologies,” wrote Wayne Weikel, the alliance’s state government affairs director.

“Consumer choice is the key factor in driving competitiveness in the marketplace, and state policy should not penalize residents of Michigan who purchase one vehicle over another.”

What’s fair?

The argument in some ways is over a relatively small amount of potential revenue — up to about $2.5 million annually, at least initially.

But Rep. Eric Leutheuser, R-Hillsdale, sponsor of House Bill 4612, said the fees are a way to ensure fairness in a system in which everyone would have to pay more.

“You don’t want to discourage innovation. You don’t want to discourage early adopters,” said Leutheuser, who owns Buick and GMC dealerships in Hillsdale.

“I just circle back to the notion that even though those are true statements, we pay for our roads with two things — (fuel taxes and registration fees),” he added. “I want to make sure I’m applying those as fairly as possible.”

HB 4612 is pending in the House after being returned from the Senate this month.

The Senate’s version added higher registration fees for commercial vehicles that weigh more than 8,000 pounds, should they adopt alternative fuel technology — $100 for hybrids and $200 for electric.

Other pieces of the Senate plan include raising diesel and gasoline taxes from 19 cents to 34 cents per gallon by 2017 and tying them to inflation, as well as cutting $700 million from unspecified state departments.

If the bill is adopted, the nonpartisan House Fiscal Agency estimates the extra fees on alternative-fuel vehicles could annually generate between $764,000 and $2.5 million — a wide gap explained in part because the Michigan Department of State doesn’t know how many passenger vehicles would be covered.

As of April 2014, the state department counted more than 25,000 vehicles powered at least in part by electricity by searching model names such as the Honda Insight, Nissan Leaf, Toyota Prius or Chevrolet Volt, the agency said.

If all of those were considered passenger hybrids, that would raise $764,000, compared to $2.5 million if all were electric, the agency estimated.

Call for lower fees

The automakers’ alliance, in the letter to Meekhof, recommended a lower fee structure of an additional $25 for plug-in hybrids and $75 for battery-powered electric vehicles, should the Legislature move forward with the plan.

It also urged that the higher fees be paid when renewing a vehicle yearly, not at the time of purchase.

“The Senate should carefully consider whether increased fees paid by the purchaser of a vehicle at the time of sale will act as an obstacle to that sale,” Weikel wrote. “The more upfront costs that state policy adds to a vehicle purchase, the more money that consumers will need to have in hand to make that purchase.”

In 2014, Michigan registered 337 new electric vehicles and nearly 12,400 hybrids, according to data from Southfield-based IHS Automotive.

But Michigan pales in comparison to nation-leading California, which registered more than 29,500 new electric vehicles and nearly 145,500 hybrids last year, according to IHS.

California also offers incentives to encourage buyers to consider hybrids or electric cars, according to the U.S. Department of Energy’s Alternative Fuels Data Center.

The federal government also offers income tax credits of up to $7,500 for the purchase of electric or plug-in hybrid vehicles.

Michigan does not offer any such credits, although some utilities, including Detroit-based DTE Energy Co., offer incentives to residential customers who charge plug-in electric vehicles at home.

Automakers like incentives because they can boost demand for hybrid and electric vehicles at a time when many customers still question their range and the availability of charging stations, among other infrastructure hurdles, said Stephanie Brinley, a senior analyst with IHS. Gas prices also have been lower, sending buyers back to trucks and SUVs in greater numbers.

And manufacturers need people to buy the new technology to help them comply with federal average fuel economy standards that will reach 54.5 mpg fleet wide by 2020.

Higher registration fees won’t dissuade serious customers, Brinley said. But if adopted everywhere, it could become a disincentive to purchase.

“(In) trying to address it through this road bill, we’re trying to answer a question legislatively that hasn’t been handled in the market yet,” Brinley said, adding that lawmakers should wait at least five years for the market to settle. “I would almost say any answer is wrong right now. We just don’t know how it’s going to play out yet.”

Add the fact that Michigan has such a small fleet of hybrids and electric cars on the road that any revenue generated will be small, she said, and “it’s also a nice little political throwaway.”

Leutheuser said he intentionally proposed conservative fee increases based on the average number of miles driven in Michigan per year and the average fuel economy of vehicles that would be considered hybrid or electric under the bill.

The idea, he said, is that drivers of hybrids or electric cars will save more in fuel than they will pay in higher fees. But he said the state should not arbitrarily determine buyer behavior.

“We are the car capital. We want to be pro-innovation and we want to be pro-technology,” Leutheuser said. “We don’t want to be known for having the highest fees in the country.”

Other states have taken similar steps. For example, Idaho charges owners of plug-in electric and hybrid vehicles annual fees of $150 and $100, respectively, on top of standard registration fees, according to the federal energy department.

Georgia, which eliminated its purchase incentives for plug-in electric vehicles, added an annual license fee of $200 for passenger EVs and $300 for commercial vehicles.

Toyota, in submitted testimony to the House, proposed an “access fee” that would replace the state’s gas tax with a flat fee determined by the state. That could be an average of $140 per vehicle.

Toyota said the fee would be technology-neutral, wouldn’t punish adopters of new technology and doesn’t raise privacy concerns the way a vehicle-miles-traveled fee would.

Leutheuser said he understands the industry’s position. But, he added, states have to do something to combat lower fuel tax revenue that is an offshoot of better fuel efficiency reducing gasoline use.

“We do our roads with fuel taxes and registration fees. It may not be the best system, but it’s the one we’ve got,” he said.

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Mon, 07/20/2015 - 7:09am
With this legislature everything is upside down or inside out - business trucks cause the most damage to our roads yet they have been paying less and less. Time for some adults to take over the legislature...
Mon, 07/20/2015 - 7:19am
It's not just about fixing roads, there is also the issue of "Winter maintenance" AKA plowing and salting. You can't blame that on trucks. You would be amazed how much is spent on that. The (at the time) Director of Operations for the Washtenaw County Road Commission told me a few years ago that virtually every dollar they received from the state as their share of the "Act 51" revenue was spent on winter maintenance leaving nothing for potholes, etc. This is where the concept of higher registration fees for electric and hybrid vehicles comes from.
Mon, 07/20/2015 - 7:15am
I understand the equity issue at the pump but agree that this is inside out and upside down. I'm with the Automakers Alliance. The good the hybrid and electric vehicles do for air quality trumps the fact that these folks use less gas, therefore contribute less to road repair.
Mon, 07/20/2015 - 7:17am
Really dumb. We want people to buy hybrid and electric cars and this will discourage them.
Mon, 07/20/2015 - 7:23am
No Donna, they just need to pay their own fair share for plowing and salting along with fixing potholes. Why should I pay their share? I'm on a fixed income and can barely pay my share let alone theirs.
Lola Johnson
Tue, 07/21/2015 - 10:03am
I'm on a fixed income, too, Joe. That is why, when my mother left me some savings bonds, I bought a hybrid. to cut down on my expenses. In 2 and a half years, I've driven 13,000miles. Now the state is going to punish me for driving less, and putting less pollution into the air and ground. My Toyota dealer makes sure my tires are properly inflated for the season. Soon this legislature will think of a way to tax me on the air, too. I think there is an assumption out there that hybrid and electric owners are all liberal yuppies who can afford extra fees. Not so.
Mon, 07/20/2015 - 1:32pm
Donna, My resistance is your approach distorts the market, encouraging people to make choices based on you wants and not what is best for the economy. It would seem we have many reasons to have roads, more than just for the driving of personal vehicles [emergency response vehicle, delivery vehicle (businesses and residential and governmental, etc.), special equipment (cranes, manufacturing equipment, road construction equipment, etc.)]. With all those reason there seems to be more benefit for residence both drivers and non-drivers and you seem to want to exclude people paying their share simply because you like what they drive [electric car]. We already have an example of what you are a proponent with those driving diesel cars and trucks. The issue is paying for the maintenance and construction of road network so all who benefit from it should be making a contribution, even the bicycle riders. Make it a head tax [since as best I can tell every resident benefits], make it an annual license tax for all vehicle, make it mileage tax [install an RFI type device that reports the mileage to the government for taxing], or make it a bond issue that is paid for by sales tax [oh, didn’t that get voted down]. Let ideas and products compete without special biases from the government so the people can chose and the ideas and products will rise or fall on their merits.
Lola Johnson
Tue, 07/21/2015 - 10:14am
Interesting concept, a head tax. Large families tend to buy more goods, drive more cars, and ride more school buses. Just think about the fuss if we taxed folks based on the number of people in the family rather than giving them incentives to reproduce in the form of tax exemptions. On the other hand, elderly folks are more likely to utilize ambulances, mail-order delivery trucks, and mobile home health services. Consider a surtax on their pensions. Or how about a corporate tax? Seems to me the more companies, the more company cars on the road. We could go on all day about who benefits from the roads, or who should pay for them. In this state now, the only thing we can be sure of is that whatever tax they use, it's going to come down hardest on the working poor.
Tue, 07/21/2015 - 8:56pm
Lola, I agree that whatever the tax it will always have a greater impact on those with the smaller incomes. The choice is a minimum quality of service from the State/government or lower cash burden on the smaller incomes. I would like to see more interest in how the money is spent and the value we get for it. I fail to hear any talk about accountability of the programs spending the money. Are we getting the best design for longer lasting roads, are we getting the best practices in road maintenance, are we getting the best practices in road construction and repairs. I wonder if we had more discussion in how the money is spend and the value we are getting we might do it with a smaller rise in taxes [current politicians, government agencies, media always want more money spent].
Mon, 07/20/2015 - 7:29am
As an EV driver it is only fair that I pay something towards road maintenance. What the State needs to do however is allow real innovation like Tesla into our state. It is time for the Dealers Association to realize that they need a new strategy for EV's. EV''s require almost no maintenance and last a very long time. They can resist, but the facts are clear. With prices coming down more people will begin to understand that the total cost of ownership is much lower.
Mon, 07/20/2015 - 8:28am
Why don't we assess a fee based on vehicle mass? An SUV weighing an extra 1000-1500 lbs. puts more wear on the roads than electric vehicle, which is typically much lighter. Why aren't we assessing who pays what based on the wear and tear a vehicle puts on the roads?
Mon, 07/20/2015 - 10:17am
I agree. I have been wondering this as well. A Hummer puts more wear on the road than a Focus.
Mon, 07/20/2015 - 8:33am
Of course automakers whould challenge this. They are under demand to improve the CAFE fuel laws.. They also want to sell cars which is why they propose the increased fees only occur on a renewal basis and not at purchase of the car. The incentives are already huge for some of these vhicles; up to $7500.00. Who do you think pays this through taxes? It is all of us one way or another regardless of what type of car/truck/suv you drive or even an Amish buggy. Who do you think will pay for the electical infrastructure for charging the batteries on all electric vehicles? I see a few of these electric stations in my hometown of Mt. Clemends in front of Gus' Coney Island of all places. Who paid for that?! We did. So it is only fair that these subsidized vehicles pay their fair share for use of the roads. Stop whining. On second thought, perhaps it is the whine that we hear from these vehicles so we can know that they are creeping up behind us as pedestrians. Seroiusly, I was walking my dog once when a Prius came up behind me. The driver did not see me and I did not hear him coming. My dog alerted me to the danger. They should be required to make some noise.
Walt Sorg
Mon, 07/20/2015 - 8:50am
The legislation ignores the reality that buyers of electric cars pay significantly higher sales taxes when they buy their vehicles, and already pay higher registration fees. The sales tax on a new Chevy Volt ($35,000) is $2,100. Sales tax on a Chevy Cruze (same frame) depending on options, is about $1,200-$1,400. And we also already pay a higher registration fee due to the higher value of the car. (Disclosure: I drive a Volt.) So instead of hitting us twice with higher taxes, they propose hitting us three times with higher taxes.
Mon, 07/20/2015 - 1:15pm
Most electric vehicles also come with large tax deductions that combustion-engine vehicles don't receive. And sales tax goes to schools, not roads. The most fair plan would be for everyone to pay on weight and miles driven within the state, but that's not realistic. If we're going to tax gas and diesel ("fuel") then all fuel should be taxed... use separate meters for charging with a rate that carries the same percentage tax as gas and/or diesel seems to make sense.
Mon, 07/20/2015 - 9:10am
Two issues. One investment and second highway construction and maintainence/operating costs. Government may chose to support credits to purchase. Government should tax all user of the highways based on lthe construction and maintainence funding.
Mon, 07/20/2015 - 9:35am
The real problem is that they are trying to tax something (fuel, registration, sales) to pay for something else (road maintenance). In the time when everything ran on fuel, using a fuel tax may have been tied to usage. Why not just charge to use the roads? Many states have toll booth readers that read your plate and apply a charge each time you pass. That money would then go toward road maintenance, and the charge would be based on the plate which is tied to a vehicle, so a light weight car could be charged less than a heavy truck. Start with the Interstates, then go toward the main state roads, then go for the local roads.
Jeff Irwin
Mon, 07/20/2015 - 10:29am
The big contribution of this article is that we finally get an estimate of what this proposal will generate in terms of revenue. It looks like probably about $1 million (There are many more hybrids than electrics). So, applying an extra tax for drivers of certain technology will generate less than 1/1000th of the money needed for road repairs. Wow, I knew the amount raised was tiny; but that is really tiny. This shows that this proposal is more political than practical. Full disclosure: I drive a Pontiac Vibe. It gets 32 mpg., better than some hybrids.
Chuck Fellows
Mon, 07/20/2015 - 12:14pm
Once again our legislature demonstrates how dedicated it is to willful ignorance. Act 51 and the manner in which roads are funded are the problem with our roads. Our preference is the simple solution to distributing money for the maximum political bang, not maintenance of essential infrastructure. Communities share in total revenues collected based upon the number of lane miles that exist in their communities, not on the actual amount and type of usage. The legislature is dominated by low population communities and their roads are really nice. Urban centers, where the majority of Michigan's economy and jobs are centered, and therefore tax revenues are created, have crumbling roads and little money to deal with the problem. Local citizens in these urban areas are already stepping up to the plate to repair their roads by digging into their own pockets. Want to solve the "problem". First define it (Citizen's Research Council - - does a good job of this) then prepare a mindful solution instead of a political one.
Mon, 07/20/2015 - 8:38pm
Chuck, It seems you care less about the how the road money is spend and more about who should get more of it to spend. I wonder if those who are spending it are spending it wisely. I wonder what their purpose is, to simply spend all they can and ask for more and more or to design and construct roads that will last the longest. In my town they are in the middle of spending millions to change two lanes with parking on both sides to two lanes with parking on one side [the other side they have expanded the grassy area between the sidewalks and road to fill the old parking] and created bump-outs so the parking cannot be used as a lane. That kind of spending makes me question the purpose of MDOT and local road commissions. You may feel Detroit, Flint, Saginaw, etc. can spend the money faster then the less populated areas, but I feel we should be more interested in getting longer lasting roads and better maintenance methods then simply spending more money. Should it be about who spends the road money or how smartly they spend it? I tried your link, I didn't find anything about roads problems and improvement, could you give me some directions?
Larry Lewis
Mon, 07/20/2015 - 1:21pm
Seems like Michigan is moving away from "green technology" and renewable energy in order to save our Clean Coal "outdated power plants" and fuel efficient cars. Even china is showing the US up in world leadership towards this new technology.
Ken Oscarson
Mon, 07/20/2015 - 1:51pm
There are so many uninformed people responding with pure opinion lacking actual facts. Linking air quality and road maintenance is inappropriate. People have been using up the pavements since the '50s without paying enough toward replacement. The end result is, the piper must be paid. You hybrid drivers have been driving conventional cars for many years using up your share of your father's and grandfather's investment and now because you can drive a hybrid, everyone else should pay your share. If we tax the big trucks more, who do you think is going to pay that tax? It is just passed along in the form of higher shipping costs, garbage pickup, school tax for buses, etc. The closer to the individual the fee is collected, the less bureaucratic, administrative fees get added on. So buck up, support paying your fair share and we will restore the road infrastructure we inherited.
Wed, 07/22/2015 - 9:28am
Put down the pipe - driving an electric vehicle typically puts much less wear on the roads. Why aren't you chasing people driving heavy duty pickups, Jeep Grand Cherokees, Escalades, Tahoes, etc?
Wed, 07/22/2015 - 3:05pm
The fee should be pro-rated and based on the weight of the vehicle along with a raise in the gas tax. The weight of the vehicle addresses road damage and the gas tax addresses road use. The more one uses the road and damages the road the more one pays. Cleaner air from alternative fuel vehicles is an indirect benefit we should all value. I'd rather have the choice on an indirect subsidy on trucked products than paying a direct subsidy as a fee on my car. Why should a retiree that drives a hybrid 3000 miles a year pay the same fee as someone that drives a truck 40,000 miles a year?
Mon, 07/20/2015 - 2:03pm
There should be no raising of anything to help fix and maintain the roads. There is money that has been designated for this from our lottery to gas taxes to whatever, and yet the roads are still crap. There is a story about a person who wanted money to invest in and a wealthy friend helped him out. He blew the money and went back for more. He told his friend, "I know the mistakes I have made and so I know I could do better this time." And his friend told him "No. If you couldn't do it with the money I gave you in the first place, what makes you think I should give you more." And that is how I feel about our roads.
Mon, 07/20/2015 - 3:56pm
No money from the lottery goes to roads. The cost to maintain our roads is tied to diesel fuel to run the road commission equipment, asphalt and bituminous products that go into the paving, patching and chip sealing, salt for deicing (gone from $24/ ton to $64/ton) and wages that have been held down due to the tight budget. Most Road Commissions in Michigan have done a stellar job of optimizing their operations and still bringing you a safe road system. We have squeezed this lemon as much as we can and there is just no more juice to get. As the roads deteriorate further, we are forced to turn poor condition roads back to gravel. The actual annual maintenance on gravel roads is about the same as paved roads but they are not very pleasant to drive and winter conditions are sometimes worse.
Barry Visel
Mon, 07/20/2015 - 2:46pm
This is what happens when we start including incentives into the conversation. Tax incentives, credits and deductions are estimated to cost our State over $30Billion each year in lost revenue. Imagine how many road problems it would solve if we just eliminated them all! If electric vehicles are so good, why do they need an incentive? If a sales tax is OK for consumer goods, why isn't it OK for services? Let's just keep that revenue and fix our roads instead of giving it away as a tax expenditure. Tax expenditures (picking winners and losers through our tax code) is the biggest budget problem we have, by far. Eliminate tax expenditures and all other budget problems go away (except for determining how much to reduce sales and income tax rates...because we don't need $30Billion a year in new revenue).
Lola Johnson
Tue, 07/21/2015 - 10:26am
Hearing much about the tax incentives. I bought my hybrid 2 years ago and received neither federal nor state tax incentive. My understanding is that the incentives for a certain vehicle end when the sales of that vehicle reach a certain number. Let's not forget the environmental benefit of hybrids and EVs.
Ed O'Neill
Mon, 07/20/2015 - 3:40pm
I agree with many of the previous comments—it would be premature to impose a surcharge of electric vehicles. The sales of electric vehicles in Michigan are so small—according to the Bridge only 337 were registered last year—that we should not be imposing new barriers. The cost of implementing the surcharge potentially could exceed the revenue generated. Other states are also struggling with this issue and the proposed solutions are all over the map. The current proposal for a $100 surcharge is based on questionable logic and arrived at without rigorous analysis. Even Representative Leutheuser’s own analysis indicates that an average gas powered car annually consumes 330 gallons of gas and pays about $62 in gas taxes. Based on the limited data currently available, that seems to be a realistic estimate. If the goal is have electric and gas vehicles contribute equally towards highway maintenance, then a $62 surcharge is reasonable. Representative Leutheuser justifies the higher surcharge by including “another 40-50 dollars in sales tax revenue that an electric vehicle is foregoing”. Since Michigan sales taxes are not committed for roads, they should not be considered if the concern is highway funding. Furthermore, it isn’t clear that electric vehicles pay less sales tax when all motor vehicle related sales taxes are included. The economics of electric vehicles is different from gas vehicles. As Walt Sorg points out above—electric vehicles cost more to purchase than their gas equivalents but are less expense to operate. As a result, more sales taxes are paid on electric vehicles purchases. Electric vehicles also pay sales tax on the electricity they consume. When all of these related sales taxes are included, it is likely the electric vehicles pay more—not less—sales tax than gas vehicles. Not only is the proposed surcharge premature, the assumptions on which it is based are seriously flawed. We deserve better!
Tue, 07/21/2015 - 9:50am
ANOTHER construction season wasted. The current crop of clowns will keeping talking and floating ideas, but not do anything. Pretty soon they will be term limited out, replaced by a new bunch and they will start the whole process over. The FIRST thing we should do is fix gerrymandering. Nothing of substance will be accomplished until that happens.
Thu, 07/23/2015 - 11:59am
My God! So many self-serving comments. "I drive this and you drive that and trucks should pay and on and on. Then there are those who are trying to help justify their electric purchase with the environment. The vehicle you drive is your personal choice, nothing more. All have that right and the right to use the roads. Then the consumption with fairness and equality. That fires up the blame game. There's only one real issue. Road infrastructure serves everyone. Whether you drive 10 miles a year or 100,000 the roads are there for that use. They are called 'public' roads for a reason. They are for the use of anyone for any reason at anytime for transportation. It matters not what type of vehicle is using the roads. Not the fuel used, the number of wheels nor the size. Roads are a necessity. Yes, even for any form of emergency vehicle. Are police cars, ambulances and fire truck numbers based on the who uses them the most or the possible demand and need? No one seethes at an extra police car or the ambulances and fire trucks sitting idle 98% of the time, yet they are a necessary 'public' purpose like roads. Whether you have one or a hundred they also need the roads and folks sure pay for that. Suddenly usage is not a big issue. If you want fairness the fees should be equal for any legal wheeled vehicle that can use any road. If it gets a license plate it pays. The roads are there and without them you aren't driving much or far no matter the type. What the money for roads and bridges is used for is huge. Experiments in light rail, people movers, hiking and biking paths, railroad subsidies and a dozen other expenditures siphon off tens of millions for the use of 1% or 2% of the traveling population. Then there's the MDOT issues. A state department that should be totally privatized. It would be easy to replace and cut costs.
Sun, 08/02/2015 - 12:19am
Great article, but we really need to define our terms. We have hybrids, plug-in hybrids, and electric vehicles. I cannot figure out who is being suggested for taxation. Idaho also just adopted new rules, but I cannot understand who is being taxed. We probably need the Federal Govt to set some guidelines on non-discriminatory and fair taxation of green cars. It makes no sense to tax a car extra just because the word hybrid appears in the vehicle description. Some hybrids are gas guzzlers too. Sounds like Toyota and the auto trade organizations may have some good suggestions, which could help frame a fair policy. Personally, I see little merit in extra and thus punitive state taxes on 100% gasoline fueled vehicles which happen to be more fuel efficient, like some hybrids. EV and plug-in road tax contribution is a fair question.
Umedlal Naran Patel
Sat, 03/26/2016 - 2:16am
EV cars cannot be totally polution as power produced at power plants still use fossil fuels, coal or gas and do polite.