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Texas Proposal Could Create an Electric Vehicle Fee

The idea for the fee has been prompted by concerns that revenue from gasoline taxes will drop if electric vehicles made by Tesla and other manufacturers become more popular.

A bill filed in the upcoming Texas legislative session would impose an annual fee on electric vehicles to help pay for roadwork in the state. (
(TNS) — The first electric vehicles built at the Tesla plant under construction in Travis County, Texas are expected to start rolling off the factory floor late next year — just in time for Texans who buy them to get saddled with a $200 annual fee from the state if a proposed new law wins approval.

The idea for the fee has been prompted by concerns that revenue from gasoline taxes will drop if electric vehicles made by Tesla and other manufacturers become more popular.

A major portion of the 38.4 cents-per-gallon state and federal gas tax collected from drivers is used for road upkeep, but electric vehicles aren't powered by gas. More than two dozen other states already levy special fees on electric vehicles to account for the difference, although such charges have been criticized as exorbitant in many cases relative to what drivers of conventional vehicles pay in gas taxes.

"With the growing numbers of electric cars on the road, I think it is time that they pay a proportionate share of highway funding," state Rep. Ken King, a Panhandle Republican, said during a hearing last year regarding the Texas proposal.

"The intent of this legislation is to ensure all vehicles driving in the state of Texas have the opportunity to contribute to the maintenance of our roads," he said at the time.

A bill to enact the fees and earmark the money for roads that King authored during the 2019 legislative session died without making it to a full vote of the House. But he has filed an identical proposal for consideration in the upcoming session that begins Jan. 12 — at a time when many lawmakers are likely to be looking for new sources of funding because state revenue overall has been hammered by the economic impact of the coronavirus pandemic.

Taxes on motor fuels generated about $2.6 billion for the state's highway fund during the 2020 fiscal year that ended in August, according to the state comptroller's office. The figure represents a decline of about 4.5% — or $124 million — compared to fiscal 2019.

Still, with electric vehicles accounting for only about 2% of vehicles on roadways nationwide, the proposed new fees — which also would include a $100 annual levy for gas-electric hybrids — aren't expected to be major revenue contributors for the foreseeable future.

An analysis by the state's Legislative Budget Board last year found that King's plan would produce no more than about $30 million annually by fiscal 2024.

King, whose newly filed bill would take effect Sept. 1 if it's approved in the upcoming session, didn't respond to requests for comment.

At least one group already is lined up behind the proposal, however.

“Our members sell all types of vehicles, and vehicles using the roads should contribute to the maintenance," said Jennifer Stevens, a spokeswoman for the Texas Automobile Dealers Association. The organization supported the bill in 2019 as well.

Tesla, which bypasses franchised dealerships in favor of selling its vehicles directly to consumers, didn't make an executive available for comment.

A number of enthusiasts of electric cars and other advocates for clean energy who turned out during last year's hearing called the $200 flat annual rate unfair and too high. Some said they didn't object to helping pay for highway upkeep, as long as fees are tied to vehicle weight, miles driven or other tangible measures that impact wear and tear.

But Wedbush Securities analyst Daniel Ives said in a recent interview that he considers such fees to be counterproductive regardless. The percentage of electric vehicles currently on the road is tiny, he said, so special fees for those who drive them don't raise much money and fly in the face of ongoing federal and state efforts to reduce carbon emissions caused by the burning of fossil fuels.

Ives also called it surprising in particular that the levies have been proposed in Texas — which is emerging as a major Tesla hub in the wake of the company's announcement in July that it is building a $1.1 billion factory in the Austin area.

Tax breaks from Travis County and the Del Valle school district totaling a minimum of about $60 million combined helped lure the Tesla plant here, although the project hasn't received state financial incentives.

"With Tesla building one of its most important footprints in Austin’s backyard, it would be very ironic (for state lawmakers) to pass a fee against electric vehicles," Ives said.

“It almost seems like it would be an April Fools' Day-type moment," he said. Tesla "is going to bring billions of dollars to the city and that area."

Still, Ives characterized the potential blow to Tesla as more symbolic than anything else, saying a $200 annual fee for owners of electric vehicles isn't likely to "significantly move the needle" in terms of depressing sales by it or other manufacturers.

Matt Holm, president of the Tesla Owners Club of Austin, agreed with that assessment, although he said there doubtless will be many in his 2,000-member group who oppose the levy or consider it too high.

For his own part, however, Holm said he isn't going to quibble about $200 to help fund roadwork. He said he travels up to 3,000 miles a month as a real estate agent and saves a net of about $10,000 a year driving a Tesla compared to when he had a gas-powered vehicle.

"Can I afford $200 to go to the roads?" he said. "Yes, I think that is something I can afford."

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