Electric car fees in Michigan would soar under Whitmer’s roads plan

Electric cars plug into charging stations outside the Lansing office of the Michigan Agency for Energy and Public Service Commission. (Bridge photo by Jim Malewitz)

Related: Michigan Senate panel rejects Whitmer gas tax, as budget dance continues

Drivers of gas guzzlers aren’t the only ones who would pay more under Gov. Gretchen Whitmer’s proposal to increase the state fuel tax by 45 cents per gallon to fund fixes to Michigan’s roads.

Registration fees for electric and plug-in hybrid vehicles also would skyrocket and become the costliest in the nation.

The fees would raise roughly $3 million of Whitmer’s $2.5 billion plan, which would also make gas taxes the country’s highest. The proposal, which a recent poll shows faces overwhelming voter disapproval, irks environmentalists who say Michigan should better incentivize low-emissions vehicles to cut greenhouse gasses linked to climate change.

“We want to make electric vehicles more accessible to everybody. This is not the way to go about it,” said Charles Griffith, director of the climate and energy program for the Ecology Center, an Ann Arbor-based environmental and public health nonprofit.

Under the Democratic governor's plan, surcharges for registering a pure-electric passenger car (such as a Tesla Model S or Ford Focus Electric) would increase to $360 each year, up from $130. Surcharges on plug-in hybrids such as the Chevy Volt or Ford Fusion Energi would leap to $150 from $47.50, the state budget office confirmed.

That’s atop registration fees, which depend on car values. All told, owners of electric cars would likely spend more than $500 a year on registration if the tax passed.

Vehicles heavier than 8,000 pounds would cost more: $460 for electric vehicles compared to the current $225 charge. The surcharge for heavier hybrids would grow to $230 from $117.50.

Those increases are similar to what some drivers of traditional cars would pay per year if gas tax jumps from 26.3 cents a gallon to 71.3 cents. Those who drive 15,000 miles per year in cars that get 30 miles per gallon would gradually pay another $225 under Whitmer’s plan.

Fees tied to gas tax

Whitmer’s proposal does not explicitly mention electric and hybrid cars. But raising fuel taxes would trigger automatic surcharge hikes under a law enacted in 2015, the last time the Legislature fiddled with the gas tax to raise road revenue. Lawmakers originally tacked on the fees under the premise that the owners of the cars should pay their fair share for road upkeep, even if they are buying little or no gas.

Under the 2015 law, every cent added to fuel tax raises fees on pure electric vehicles by $5.00, while hybrid fees increase by $2.50. Whitmer’s proposal leaves the mechanism untouched.

“The idea was this would be a way to bring equity,” said Rep. Eric Leutheuser, R-Hillsdale, who was among those pushing for the current surcharges during Michigan’s 2015 gas tax debate. “People who were driving on the roads but not buying gas would pay a little more.”

Leutheuser, who in 2016 sold a Buick GMC dealership he owned for three decades, told Bridge he opposes Whitmer’s fuel tax hike in part because it’s regressive, disproportionately burdening lower-income drivers.

Leutheuser said he doubted surcharges would significantly affect the electric market, which he expects to grow as manufacturers make more affordable models.

“A couple hundred bucks on a $25,000 purchase does not affect someone’s buying decision,” said Leutheuser, who added he sympathizes with drivers of electric vehicles upset over extra fees.

Al Warner, a retired mechanical engineer in Brighton who last month bought an all-electric Chevy Bolt, said higher fees would not bother him.

“I understand I’m putting wear and tear on the roads — I should [pay more], yes,” he said Wednesday while the Bolt charged in his garage. The registration fees, he added, are “peanuts compared to what you’re saving in fuel costs.”

Tiffany Brown, Whitmer’s press secretary, called the tax proposal “the first step in the negotiation process and [Whitmer] is open to other real solutions that get us to 90 percent of roads in good/fair condition."

"It’s not the governor’s intent to penalize electric vehicle owners, the surcharge increase is a result of the 2015 roads package that predates her time in office,” Brown wrote in an email.

Electric car owners would save money on repairs while driving on safer roads, Brown added. And halfway through Whitmer’s 10-year roads plan, a commission would consider alternatives to a fuel tax "given the increasing number of electric and alternative fuel vehicles," Brown said.

Electric vehicles are a fast-growing segment of the auto industry, with domestic sales jumping 75 percent to 328,000 in 2017. In Michigan, the birthplace of the auto, only 4,100 electric vehicles are registered, according to the Secretary of State.

Last year, Michigan had the nation’s 13th lowest market share of the vehicles — 0.59 percent of all vehicles sold in the state were electric, according to the tracking website EVAdoption.com.

Climate impact

The transportation sector produced one-third of Michigan’s energy-related carbon dioxide emissions in 2016, the most recent data available from the U.S. Energy Information Administration.

Last year, the U.N. Intergovernmental Panel on Climate Change — comprised of the world’s top scientists — said reaching a net of zero carbon dioxide emissions by 2050 could limit warming to 2.7 degrees Fahrenheit and avoid some of the most severe consequences of warming.

Whitmer has enrolled Michigan into the U.S. Climate Alliance, a group 20 states that have pledged to shrink carbon footprints. Michigan’s aim is to cut emissions by 26 to 28 percent of 2005 levels by 2025.

Boosting taxes on cleaner vehicles runs counter to that goal, said Ellen Hughes-Cromwick, associate director of social science and policy at the University of Michigan Energy Institute.

While more expensive gasoline could act as a carbon tax that makes folks consider burning less fuel, steep upfront fees on cleaner vehicles could limit their market growth, said Hughes-Cromwick, a former chief global economist at Ford Motor Co.

“We really need to move in that direction of reducing [carbon dioxide] emissions, if we all agree on the science of climate change,” she said. “Therefore, I would be really discouraging any sort of tax that would disincentivize the purchase of EVs.”

“If anything, we want to incentivize the demand,” Hughes-Cromwick said.

Unlike 11 states, Michigan does not offer statewide tax credits, rebates or other incentives for purchasing electric vehicles.

The federal government offers tax credits up to $7,500 for certain purchases, but it’s limited to companies that have made fewer than 200,000 vehicles — a cap General Motors and Tesla have reached. Legislation from Michigan U.S. Sens. Debbie Stabenow and Gary Peters would triple the cap, but it may face resistance from conservatives who argue the government should not favor electric cars.

Michigan is among 21 states charging extra for registering electric and/or hybrid vehicles, according to the National Conference of State Legislatures, and the state’s fees are already on the higher end in that pack. Whitmer’s proposal would make Michigan’s fees eclipse Georgia and West Virginia, which each charge electric vehicle owners $200 and do not add separate fees for hybrids.

Griffith of the Ecology Center said electric vehicle owners should chip in to help fund road repairs. But he said the surcharges are disproportionate to how much the vehicles strain the roads.

A fairer option, Griffith said: Charge drivers based upon mileage or electricity use, as some states are considering.

Brad Garmon, interim CEO of the Michigan Environmental Council, said Whitmer’s administration is sensitive to environmentalists’ concerns.

“The response we’ve gotten suggests they’re open to that conversation, but it’s about revenue at this point, and those fees are going to be part of it,” Garmon said.

Slowly growing market

Hughes-Cromwick, the former Ford economist, said Detroit’s Big Three automakers have moved slow in rolling out electric cars, which appear to be the transportation industry's future.

“If they wait too long, they're going to miss the opportunity. That's the concern,” she said. “And I think the state of Michigan really has to play a role here to help nudge this along so that we don't end up with significant tax base erosion and job loss.”

Despite their frustrations, electric vehicle advocates have cheered a few recent developments in Michigan.

The Michigan Agency for Energy is mapping ideal locations for charging stations across Michigan, and the state Public Service Commission approved a $10 million Consumers Energy program to incentivize drivers to charge their electric vehicles at certain times of the day.

Up to 3,000 people could get a $500 rebate on vehicles through the Consumers Energy program. DTE Energy is pitching a similar program the commission has yet to approve.

Additionally, Michigan is using some of the $65 million it received in court from Volkswagen's emissions cheating scandal toward electric school buses and charging stations.

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Concerned Citizen
Tue, 04/23/2019 - 8:36am

I thought the gas tax might be a good idea because it would encourage a move from fossil fueled cars to electric. With the added electric car fee it removes that incentive. I am no longer in favor of this plan.

Sensible Citizen
Tue, 04/23/2019 - 8:56am

We need the fees to pay for the roads.

Also Sensible
Tue, 04/23/2019 - 10:00am

I agree with you, but it also sucks to pay that much all at once. It would be nice if they could break it up so you pay every month/quarter instead.

Richard Jaissle
Tue, 04/23/2019 - 10:16am

Absolutely, as well as having trucking companies pay their fare share. We need everyone who uses the roads to pay for the roads - and those that damage the most them to pay the most.

Incredible Bulk
Wed, 04/24/2019 - 6:21am

Michigan tacked on a gas tax to help pay for fixing roads in 2010 or 2011 and they're still garbage. If you read the article, the new proposal would only raise $3M of the $2.5B needed. Think about how dumb that sounds. Tax the crap out of everyone to raise $3 million when 2 billion, 500 million dollars are needed.

Wed, 04/24/2019 - 7:44am

The 3m raised is from the electric car fees alone, the primary package does raise 2.5B.

richard scott
Tue, 04/23/2019 - 9:20am

Were the energy for the electricity not come from carbon a rebate good. However cost of road is a sum of weight per axle per mile.
For a very long time gas tax is similar to sales tax, may put undue pressure on those with low income. Taxing luxury unnecessary purchases is equal to tax on things needed to feed and clothe family. So it is with road usage. Those who wear the road down more should pay a hefty tax

richard scott
Tue, 04/23/2019 - 9:20am

Were the energy for the electricity not come from carbon a rebate good. However cost of road is a sum of weight per axle per mile.
For a very long time gas tax is similar to sales tax, may put undue pressure on those with low income. Taxing luxury unnecessary purchases is equal to tax on things needed to feed and clothe family. So it is with road usage. Those who wear the road down more should pay a hefty tax

Tue, 04/23/2019 - 9:31am

Everybody who uses the roads should some how be paying their fair share to keep up the roads.

Paul Jordan
Tue, 04/23/2019 - 9:39am

We own an all-electric vehicle after owning hybrids for 17 years. Reducing carbon emissions is of the highest importance for our grandchildren, and this is an action that we can take without waiting for action from a federal government that is impotent due to systemic corruption. As a result, I don't mind paying a bit more in registration fees--as long as the state is taking firm steps to correct inequities in transportation funding.
These inequities include indirect subsidies (via low fees and unenforced weight limits) for companies that drive uotra-heavy trucks on public roads, totally antiquated funding formulas, and relying on the gas tax and registration fees to fund roads. (The exclusive funding focus on roads amounts to an indirect subsidy to the automobile industry, and promotes carbon emissions.)
The reality is that the real problem is the constitutional restrictions on the state income tax. We need a graduated income tax, and taxation levels that will support the infrastructure that Michigan needs in order to once again become a national leader in business, education, and quality of life.

Charlotte Morton
Wed, 04/24/2019 - 12:24am

I agree that electric cars get some kind of incentive, but they also use the roads and should help pay for them. The trucks in MI can carry much heavier weights than some other states and this along with the condition of the roads creates even worse roads. I think the trucks should carry less weight and pay more road use fees. I was at the Road Summit last week and we found out that MI invests the least per capita for roads than all the other midwest states. The national average spending for roads per capita is $795 and MI is $470. This is our state and we must invest in it or it will continue to fall to ruin. It would be about $256. per adult to get the 2 billion $ to fix the roads and $319 to get 2.5 billion $. (source Center for MI calculation on census statistics). We have dis-invested in our roads for 40 years, repair costs keep going up and the higher fuel economy reduces the amount of gas tax collected. Poor roads impact business, consumers, industry and tourism.

Tue, 04/23/2019 - 9:39am

Given advances in "smart" metering of electric use might it be feasible to design electric rates that collect a surcharge on electric consumption for recharging electric vehicles to go into the road fund. This would be more proportional to actual miles driven and less an EV disincentive than high annual registration fees.

Tue, 04/23/2019 - 9:41am

Ahh, the law of unintended consequences. Why don’t we fix the damn though process.

Stephen C Brown
Tue, 04/23/2019 - 9:53am

Since these fees are earmarked for road maintenance, a more equitable way is to tax mileage driven each year by each vehicle, with a weight multiplier. Michigan allows the heaviest trucks I've ever seen outside of Texas, and they clearly cause more wear and tear to the roads.

Tue, 04/23/2019 - 10:11am

Gretchen should just cut her losses on this one. That she admits this tax would be redirected to political paybacks before it even starts, well, call it what it is, a dismal failure.

Connie G
Tue, 04/23/2019 - 11:52am

I have a Volt and drive the same roads as everyone else, why shouldn’t I pay a reasonable fee for better roads. I use to spend $300 a month on gas now it is $35 a month in electricity and about $20 in gas a month traveling to visit family. I can easily afford the fees from the savings of driving an electric vehicle.

Frugal Citizen
Tue, 04/23/2019 - 12:02pm

The increase in the registration fee eliminates 20% of the annual savings I planned on when making the tough decision to stretch our family budget on the higher cost of an electric vehicle.

Gary L.
Tue, 04/23/2019 - 2:09pm

I prefer an electric car gasoline equivalent tax based upon mileage or electric use, for I’m retired and drive mine less than 4,000 miles a year. The present fee presumes that I’ll drive 14 to 16 thousand miles a year.

James Roberts
Tue, 04/23/2019 - 3:28pm

Why are we going over this again. With 75 percent of voters saying no, the governor can shut down the state if she wants but can't see that changing any minds.

Don Reeck
Wed, 04/24/2019 - 8:05am

I agree that all drivers should share the cost of road maintenance. Equitable sharing of the cost should be tied to road use and wear and tear. It also makes sense to tax carbon fuel use to offset CO2 pollution and the externality costs of resource extraction, shipping, spillage, and environmental remediation tied to carbon fuel use.
So it makes perfect sense to also tie the electric vehicle cost sharing to road use, which would be tied to miles driven and/or a surcharge on EV electricity used. The surcharge should not apply to electricity derived from sustainable sources such as solar or wind, which are the true zero carbon energy sources.
My proposal would put the costs of transportation road and environment damage directly on the causes of damage to roads and the environment, while not placing a disincentive on EVs or sustainable energy.

Wed, 04/24/2019 - 9:47am

I am delighted to hear that Gov. Whitmer is not undoing the foresighted work of the previous administration in providing for a gradual changeover of the source of road maintenance funding as American society moves to electric vehicles. We definitely need the EV and HEV owners to pay their fair share of road building and repair costs. Further, these vehicles no longer need subsidies if they "save owners money" as claimed. We should drop any state-funded EV subsidies like hot potatoes and lobby the Federal government to end them entirely rather than expand or extend the existing programs as Tesla and GM are lobbying for.

An important "dirty secret" throughout the Midwest is that EVs don't actually reduce overall CO2 emissions by very much, because so much of our electric power comes from coal and now natural gas. So many of you are spending more, possibly much more, to buy a vehicle that's heavier than it's same-size IC engine counterpart, creates extremely hazardous waste when scrapped, and does not actually help the environment unless you own a house or business and spend an additional $20-50k buying solar panels and batteries to charge up your car(s).

Wed, 04/24/2019 - 12:05pm

EVs offer a pretty significant reduction in carbon output with regards to energy conversion. A massive coal-fired turbine, dirty as it is, runs at a much higher efficiency than the small ICE in your vehicle. The amount of carbon released by a coal plant to produce the electricity for an EV to travel 100 miles is less than than amount of carbon released by an ICE to travel the same distance. Of course, there are arguments to be made about carbon emissions in the supply chain and manufacturing of an EV, but there are definitely reductions in equivalent operational emissions

Tim Marschner
Sun, 04/28/2019 - 10:58am

So where is the incentive for the average person to work towards a clean environment by putting their hard earned money purchasing a electric vehicle or solar panels? We want a cleaner and safer environment only to be slapped with extra fees for electric vehicles or lopsided net metering charges!

Thu, 05/02/2019 - 8:49am

It should be based solely on mileage. If you drive, you pay. Gas is that way, why wouldn't electric cars be the same?? Either way they should be starting at how they plan to maintain the roads first. Don't just plop down billions and in 3 years the roads all fall apart again. Salt and the truck weight, do something about that first and NOW. and make companies be behind their work or its free. Its really that simple.

Tue, 05/07/2019 - 9:10am

The problem is an antiquated system of road funding. Act 51 is a 50's law and now worthless, the gas tax won't work. Change the income tax, let us all of us share the cost, otherwise we will have toll roads everywhere with no controls over how much we are charged. Charge those big trucks for their damage based on weight. Don't forget trucks will be electric too. It's time to change the system, then we can raise the income tax by an amount we can all agree on and really fix the problem with priority on the travel levels and road and bridge conditions. Then the legislature can find a solution for auto insurance. Mine just went up 12%. Change can be good!

Rod M.
Fri, 05/10/2019 - 1:50pm

"Those who drive 15,000 miles per year in cars that get 30 miles per year would gradually pay another $225 under Whitmer’s plan."

Cars that get 30 miles per year? Who writes these articles?

Paul Jordan
Sun, 06/02/2019 - 10:07am

A couple of years ago--during the Snyder administration--I read an article that pointed out that the state was not ticketing overloaded trucks. I don't know that this would be still true, but before the state adds to the gas or EV tax it should strictly enforce existing load standards. This would generate more road funds, AND reduce wear and tear on the roads.
Secondly, the state should reduce the loads permitted to be hauled in trucks. This was raised in the Engler administration, and I understand that our load limits are the highest in the nation. (Perhaps that is one reason that we have the worst roads in the nation...?) Let's lower those to a more reasonable/usual level--despite the predictable screams from trucking companies!
After we do those things, THEN let's talk about raising the gas & EV taxes!

Mon, 06/10/2019 - 2:57am

This will kill the truck sales because of the mileage they get and their weight. More auto plant layoffs.

Al Warner
Thu, 07/25/2019 - 5:47pm

The "peanuts" comment was based on the $160 registration fee I paid for the Bolt. Was unaware of the 2015 indexing of the fee to the road tax until Malewitz's article. Figure I'm saving about $1K/year in fuel for 10 Kmi. Of course, these savings would go up as fuel prices increase.

Bottom line, the war against CO2 is going to be expensive and disruptive, but WE've got to do it ... NOW!