The world of electric vehicles in Texas is in for a rude awakening with the new tax law signed by Governor Greg Abbott over the weekend. The law, which takes effect on September 1, 2023, imposes a new tax of $200 annually on owners of electric vehicles. To register a new electric vehicle, owners will be required to pay $400 on top of other fees, while renewing registration will cost $200. The law does not apply to electric motorcycles, mopeds, and autocycles, however.
The move has attracted mixed reactions from Texans, with some seeing it as a fair way to ensure that everyone pays their fair share, while others see it as a discouragement to the uptake of electric vehicles. State House Rep. Terry Canales, an Edinburgh Democrat, who spoke during the debate on the law in April, defended the move, saying, “This is extremely important to make sure people are paying their fair share and that we have adequate funding for the preservation and maintenance of our highways in the future.”
Currently, Texas has almost 200,000 electric vehicles on its roads, with more than 30,000 new EVs added so far this year, according to data from the Dallas-Fort Worth Clean Cities Coalition. This growth rate is remarkable and shows how Texas is leading the way in adopting electric vehicles in the United States. However, the new tax on electric vehicles puts a damper on the growth trend, and many are worried that it may slow down the adoption of electric vehicles in the state.
On the other hand, drivers of hybrids and gas-fueled vehicles do not have to pay such fees; instead, they pay a 20-cent per gallon gas tax. Both the gas tax and electric vehicle tax go towards the state highway fund, with some gas tax revenue diverted to schools as well. The new tax will funnel at least $38 million in new money to the state highway fund. According to the comptroller’s office, gasoline and diesel taxes will generate an estimated $3.8 billion in revenue for the state in 2024.
The average owner of a gasoline-fueled vehicle in Texas pays roughly $130 in state gas taxes per year, according to average annual mileage and fuel economy data maintained by the Federal Highway Administration and the Environmental Protection Agency. Some Texas legislators had suggested creating a lower tier of electric vehicle fees set at $100 a year for lighter weight vehicles during the debate over the bill in the House on April 24. However, the idea was defeated, and the bill was passed with wide bipartisan support.
The new tax on electric vehicles in Texas is part of a broader trend of increasing taxes on electric vehicles in the United States. In 2020, 13 states, including California, imposed new fees on electric vehicles, according to the National Conference of State Legislatures. The move by Texas to impose a tax on electric vehicles is, therefore, not entirely unexpected.
The tax on electric vehicles may raise concerns that the cost of owning and operating electric vehicles will rise and that the financial incentives to buy electric cars will be reduced. However, advocates of electric vehicles argue that the savings on fuel costs and maintenance expenses of electric vehicles outweigh the new tax imposed. They also argue that the tax on electric vehicles is counterproductive and goes against the trend of reducing carbon emissions and mitigating climate change.
According to the International Energy Agency, transportation accounts for around 24% of global CO2 emissions, and the uptake of electric vehicles is seen as a way to reduce these emissions. In addition, the cost of batteries and electric vehicles is expected to fall, making electric vehicles more affordable for the average consumer. As such, advocates of electric vehicles remain optimistic that the new tax on electric vehicles will not dampen the growth trend, and that Texas will continue to lead the way
in the adoption of electric cars. However, some experts suggest that the new tax could lead to a slowing of the adoption rate, especially among those who may be on the fence about making the switch to electric vehicles.
“There’s no doubt that this new tax will have an impact on some consumers’ willingness to make the switch to electric vehicles,” said John Wilson, a transportation expert and professor at the University of Texas. “For some, the added cost may be enough to make them think twice before making the switch.”
Despite this, many in the electric vehicle industry see the new tax as a necessary step in ensuring that EV owners pay their fair share for the use of Texas roads. “We believe that everyone who uses our roads should contribute to their upkeep and maintenance,” said Tim Greiner, co-founder of Electric Cab of North America, a Texas-based electric vehicle taxi service. “This new tax is a step in the right direction in terms of making sure that electric vehicle owners are doing their part.”
The debate over the new tax on electric vehicles has been ongoing for several months in Texas, with lawmakers and industry advocates alike weighing in on the issue. Some have suggested that the new tax is unfairly targeting electric vehicle owners, while others have argued that it is necessary in order to ensure that the state’s roads are properly maintained and repaired.
Ultimately, the new tax on electric vehicles is just one part of a larger conversation about the future of transportation in Texas and across the country. As electric vehicles become more common on the roads, there will undoubtedly be new challenges to address, including questions about how to fund the maintenance and repair of roads, as well as how to manage traffic congestion and other issues related to the increased use of electric vehicles.
Despite these challenges, many experts remain optimistic about the future of electric vehicles in Texas and beyond. With advancements in battery technology and charging infrastructure, electric cars are becoming more accessible and affordable than ever before, making them a compelling choice for many drivers who are looking to save money on gas and reduce their carbon footprint.
“We are confident that the adoption rate of electric vehicles will continue to grow, even with this new tax in place,” said Greiner. “At the end of the day, electric cars are the future of transportation, and we are excited to be a part of that future.”