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.
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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.
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 Celsius 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
“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.