The Transportation Committee in the Texas House of Representatives is currently considering a bill, House Bill 427, which would add additional costs to owners of electric and hybrid vehicles. Representative Ken King of Hemphill introduced the measure at the start of the legislative session. Representative King proposed similar legislation in 2019, but that bill never made it out of committee.
The bill proposes to charge electric vehicles owners an additional $200 every time they register or renew their vehicle’s registration. For those who own hybrid vehicles, the bill sets their additional fee at $100.
Why Do Proponents Believe Texas Needs HB 427?
Currently, Texas funds many of its infrastructure projects, such as new roads, bridges, and maintenance of existing roads through a gasoline tax. Given newer vehicles’ increasing fuel efficiency, the state takes in less revenue per mile traveled than in prior years.
Obviously, electric vehicles don’t provide revenue via the gas tax, so as more and more vehicles run on electricity, instead of gas, tax revenues will continue to decline. This trend has the potential to create funding shortfalls for maintaining our roads.
Proponents of the bill argue that its implementation will add $55 million to the highway fund in the next few years, with the potential to grow over time. At this time, no one can reliably know the odds that HB 427 becomes law.
Problems with HB 427
Few have paid much attention to HB 427. As a result, there has yet to be a robust debate about the merits of funding our roads through a registration charge, as opposed to other mechanisms. In addition to one objection to HB 427, which is already a matter of public record, HB 427 may fail to fully address other infrastructure issues raised by a switch to more electric vehicles. Let’s go through these concerns.
HB 427 Taxes Electric Vehicle Owners More than Owners of Gas-Powered Cars
In reading up on HB 427, I came across a single objection. One opponent of the bill observes that the additional registration fee exceeds what the average Texan pays in fuel tax, if they own a gas-powered vehicle. While some may argue that most electric vehicle owners make far above what the average Texan does, thereby justifying the tax increase as a tax on the rich, trends in vehicle ownership make it likely that in the coming years more people with lower incomes will own electric cars.
This is hardly a trivial concern. For people at the bottom of the income ladder, $200 eats up most of a week’s paycheck for a person on a modest wage. While not currently an issue, it’s also one of those completely foreseeable problems, which well-crafted legislation can avoid before it occurs.
Roads Aren’t the Only Infrastructure Electric Vehicles Strain
Perhaps the greatest flaw of adding an additional electric vehicle registration fee to offset lost gas taxes is that it treats a new technology like an old technology. Unlike gas-powered cars, electric cars not only require well-maintained roads, but also a substantial expansion of our power grid. While an additional fee provides revenue to tackle the roads portion of the formula, it does nothing for the electric grid.
In addition, using a fee in place of the gas tax is a crude instrument. If legislators insist on maintaining the current dedicated highway fund model, then a closer tax analogue is a tax on electricity use, since that’s what fuels electric vehicles. Right now, this approach presents serious problems, because there’s no way to impose the tax only on electric car owners. Implementing a fuel surcharge on electric vehicles creates a situation where the whole population subsidizes the taxes of a relative few.
Some argue that the fuel tax is more fair, since a person only pays for what they use. Of course, this line of thinking is mistaken, because commercial vehicles pay for a large portion of gas taxes. These taxes are then factored into the costs of goods, which means that even people who don’t own a car pay the gas tax indirectly.
HB 427 Perpetuates the Archaic Idea of Dedicated Funding for Highways
Proponents of HB 427 argue that it presents a long-term solution to declining gas tax revenues. This concerns them, because absent a dedicated funding source, the only way to pay for the roads will be through general revenues. The proponents have other things that they would like to spend that money on, which is why this is an issue in the first place.
Legislators like dedicated funding sources for specific areas of the government, not because they make things better for citizens, but because they prevent the need for lawmakers to make tough decisions. While I don’t envy the representatives and senators who need to choose between spending more on roads versus giving more money to local schools, that’s the job they signed up for.
Another political perk of increasing registration fees is that politicians get to claim that they only raised fees, not taxes. I doubt any Republican in Texas wants to be the person who goes to the voters with a tax increase among their accomplishments. As a practical matter, there’s no difference between a higher fee and a higher tax.
Some may argue that fees only apply to people who engage in a specific behavior, but even that is a flawed argument. We don’t refer to the liquor tax as a fee, even though anyone can avoid paying it by not purchasing alcohol. Similarly, an electric vehicle registration “fee” has an easy out: buy a gas-powered car.
After looking into the arguments for and against a special registration fee for electric vehicles, it seems to me that HB 427 solves more problems for politicians than it does for citizens.