Opinion | Michigan needs fair approach to taxes on electric vehicles


Charles Griffith has more than 20 years of experience in research and advocacy on clean energy solutions, with a focus on the automotive and transportation sector and advocating for cleaner vehicles, fuels and transportation choices.

As Michigan leaders continue to debate ways to address the state’s poor road conditions, it’s important that they consider road funding solutions that won’t penalize those who are driving the next generation of electric vehicles.

The Ecology Center recently released a new report offering original research and policy recommendations for a road funding model that promotes a clean transportation shift benefitting the health of Michigan’s environment, people and economy.

The Ecology Center’s research shows that battery electric and plug-in hybrid vehicle owners are charged more in taxes and fees than owners of comparable gasoline-powered cars and trucks.

Plug-in vehicle drivers currently pay between $300 and $390 in upfront vehicle registration fees each year, about twice as much as comparable vehicles. Since these vehicles represent fewer than 1 percent of cars and trucks on the road today, the disproportionately high fees accomplish very little to improve our state’s roads and bridges. However, the fees do make cleaner cars less appealing and accessible for cost-conscious consumers.

Total fees and taxes are as much as 67 percent higher for electric vehicles (EVs) and 30 percent higher for plug-in hybrid electric vehicles (PHEV) than their internal combustion counterparts. A typical EV driver currently pays $90-$160 more each year than the driver of a comparable gasoline-powered car or truck, and someone with a PHEV pays $20-$70 more. 

Because the EV surcharge is tethered to the gas tax, these disparities will grow even wider if gas taxes are increased without a change to the current surcharge formula.

While compromise legislation raised gas taxes and registration fees across the board in 2015, it also added annual surcharges for plug-in electric and hybrid vehicles, intended to make up for lost gas tax revenue. Unfortunately, the 2015 adjustments weren’t enough to solve long-term funding shortfalls, and they imposed a calculation formula that overburdens EV drivers.

Because plug-in vehicle owners pay more for their cars up front, they already pay higher sales taxes and registration fees, even before the electric vehicle registration surcharge. These higher registration fees largely make up for any lost gasoline tax revenues, even before the surcharge. 

ev vehicle

Electric vehicles should pay their fair share of transportation system costs, but this means the additional fees they pay should be lowered to a level comparable with what efficient internal combustion engine vehicles pay.

Paying Their Fair Share” proposes several options for legislators to improve the current situation. One straightforward stopgap measure would be to lower PHEV and EV fees to more equitable rates, or at least to freeze them at their current rates. A better, more equitable approach in the short or medium-term would be to replace a single fixed EV surcharge with differentiated fees based on the total road funding fees and taxes that comparable gasoline vehicles pay.

Longer-term, additional solutions will need to be explored to address anticipated increases in vehicle fuel-efficiency overall, as well as to reflect the actual mileage that plug-in vehicles travel each year.

Given Michigan’s stake in the future of the auto industry, which is increasingly electric, it is critical that our state take a more nuanced and fair approach to levying fees on these vehicles. If we want the rest of the world to buy the advanced technology vehicles that our auto sector is producing, we need to guide the way in developing the advanced vehicle policies that will help to accelerate their adoption.

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Mon, 02/03/2020 - 8:23am

What about all these bike lane who paying for them NOT the people who use them???

Mon, 02/03/2020 - 8:53am

Driving a Chevy Volt, or a Tesla Mod 3, or even an F-150 pickup truck will not damage a properly built road. The real culprit is our reliance on salt and excessive truck weights that do the real damage to bridges and roads.

Mon, 02/03/2020 - 9:10am

The author is obviously willing to twist the facts to push his electric vehicle agenda. Given the average mileage driven per vehicle in Michigan and the gas taxes paid, people driving electric vehicles are still getting a bargain even considering the higher registration fees. His math does not add up and spews fraudulence. When you also factor in the government subsidies for electric vehicles, then his argument that somehow electric vehicle owners are being cheated becomes even more ludicrous. Even his claims that electric vehicles are cleaner is debatable when one considers the pollution and industrial consequences of generating the the added electricity needed to power them. Again, it would be nice if Bridge would do some fact checking before publishing this kind of nonsense.

Mon, 02/03/2020 - 2:19pm

Also, EPA grants and the state grants funded by the VW dieselgate settlements are primarily tied to electric and not other forms of alternative fuels that have a higher deliverable in reducing pollutants from the well to wheels (i.e., CNG, RNG and propane) in commercial fleet applications.

Wed, 02/12/2020 - 9:22am

D.C. I see you had to quote an article based on data from the U.K. to try to prove your point and that biased article even counted nuclear power as "clean", which many will argue just the opposite. Why didn't you use Michigan data? We have coal power plants and a lot of diesel too and are building/converting gas powered plants too all ll at a great cost to Michigan's citizens. Even wind power is costing us plenty. Any increase in electric capacity has an impact to the environment in one way or another. When we increase the number and output of natural gas plants, then natural gas prices go up and the use of more cheaper less clean fuels will go up in other places. Many just failing to grasp the big picture or just don't want to.

Mon, 02/03/2020 - 9:20am

I'm of the opinion that the higher weight of hybrid and all-electric vehicles, plus the higher incomes of almost all HEV and EV purchasers more than justifies this slight differential in annual fees devoted to road repair. Further, many EV enthusiasts are pressuring the state to fund or at least rebate a significant portion of the cost of adding EV charging infrastructure to our state rest areas, and commuter lots. That's in addition to current federal and state support for the cost for private businesses to add EV charging to their business, in the case of roadside service stations or restaurants, or to office parking lots.

Since it will be at least 2030 before the midwest's electric utilities are up to half or more renewable generation, rapid adoption of EVs and HEVs does little or nothing to reduce the total emissions of greenhouse gasses and other pollution resulting from transportation. So re-evaluate the balance in another 9 or 10 years.

Walt Sorg
Mon, 02/03/2020 - 10:48am

Writing as a longtime Volt owner: the penalty becomes more pronounced as the car ages for a couple of reasons.
First, my registration fee is based on the new-car price ($40,000 before tax incentives) and, after 8 years of use, the car has a trade-in value of around $4,000.
Secondly, as the car gets older the battery capacity is reduced significantly meaning I'm using more gasoline than when new. My typical combined MPG is down from 90 MPG to 40 MPG, which is about the same as a fuel-efficient ICE. And if I replace the battery pack to improve that number, the sales tax will be around $420.

james roberts
Mon, 02/03/2020 - 11:36am

i love the part where Mr. Griffith points out that EV buyers already pay more for their more expensive vehicles, hence pay more in sales tax and registration fees. Last i checked no one forced them to make the EV purchase, not to mention most of us peons cannot afford one. But I am sure he will also point out we should be happy subsidizing his wise purchase to help the environment anyway.

Mon, 02/03/2020 - 1:16pm

As someone who doesn't believe the relative value of the car or it's driver's income should have any bearing on how taxes on that car should be assessed, why not use this as a start to move towards annual car taxes (registration) being based upon miles driven?

Jeffrey Kless
Tue, 02/04/2020 - 12:37pm

Great idea except miles driven alone has only a part of what damages the road. You must take into account the weight of the vehicle , F=MA, the type of road, bituminous or concrete, various temperature differentiations throughout the state, different procedures followed by our numerous counties, different soils throughout the state,............

Tue, 02/04/2020 - 2:02pm

Perfect doesn't exist but amount per mile could vary with GVW.

Paul Jordan
Mon, 02/03/2020 - 6:19pm

The Republicans who've dominated Michigan's public agenda for the past 30+ years have been strategically brilliant. By cutting the state income tax at every turn they knew that it would inevitably impose competition of interests and priorities on future state governments. In this competition, they were able to put their thumbs firmly on the scale of public policy to shift costs from businesses (like trucking companies) onto the general public. 'Pro-business' Republicans firmly believe in socialism for businesses and free-markets for everyone else (though they won't acknowledge it).
Increasing fees on electric vehicles are one example of this, as is--for that matter--increasing fuel taxes. Although it has been reported in the past, not much attention has been paid to the fact that past administrations purposefully failed to enforce truck weight requirements (and penalties).
If the increases in weights that Engler's administration implemented are breaking down our roads, then the first step should be to re-impose weight restrictions--and enforce fines for breaking them.

Todd Scott
Thu, 02/06/2020 - 3:12pm

So the author doesn't think his EV is being subsidized as much as ICE vehicles are, while ignoring EV federal tax credits. Okay. "Facts matter" but not in Bridge's op-eds.