NCPA - National Center for Policy Analysis

New Tax on Hybrid Vehicles to Support Highway Maintenance

May 1, 2013

Hybrid and electric cars have been touted by environmentalists as the logical solution to the carbon emissions of traditional internal combustion vehicles. In Virginia, some hybrid drivers are angry about a new law that institutes a tax on these eco-friendly vehicles. The tax aims to compensate for lower gas tax revenues that support road maintenance, says USA Today.

  • The new law, signed by Virginia Governor Bob McDonnell, will require hybrid and electric car owners to pay a $64-per-year fee to make up for what these owners aren't paying at the pump.
  • Texas, Massachusetts, New Jersey and Arizona are considering similar fees or taxes to supplement their gas tax income.
  • In Washington, the registration fee for owners of all-electric vehicles is $100.

While the laws may seem to juxtapose President Obama's push for hybrid and electric vehicle ownership, green vehicles use public roads just like regular gasoline-powered vehicles. Because the green vehicles use less gas, they are currently contributing to less local road and highway maintenance without the new tax.

  • Hybrid and electric sales are projected to increase by 17 percent to 550,000 through 2016.
  • State and federal gas tax revenues have also decreased because the taxes have remained a flat per-gallon amount that hasn't increased in years.
  • Gasoline-powered vehicles are also more fuel efficient today than in decade's past due to market demand and environmental regulations.

Opponents of the new taxes claim that they are a politically motivated attack on proven solutions to climate change. Other states are allowing for a longer time period to establish the appropriate level of taxation.

  • Virginia's solution also lowers the overall gas tax rate from 17.5 cent to 10.5 cents a gallon while adding 0.3 percent to the state's sales tax and the hybrid tax to make up for revenue shortfalls.
  • Besides paying for road repairs, gas taxes also discourage gas consumption and reduce the demand for roads.
  • Over the long term, the American Association of State Highway and Transportation Officials projects an average gap of $14.7 billion a year in the money needed to fund the federal Highway Trust Fund, which pays for a highway construction and maintenance primarily from the federal fuel tax.

Source: Jayne O'Donnell, "Hybrid Drivers May Save on Gas but New Tax Gotcha," USA Today, April 28, 2013.


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