Federal Leadership

EVs Are Neither The Source Of Nor The Solution To The Highway Trust Fund’s Problems

June 15, 2021

Washington, D.C. – In recent weeks, some Members of Congress have suggested imposing a tax on electric vehicles (EVs)—which make up less than 1% of all vehicles on the road in the United States—as a possible source of revenue for infrastructure negotiations. This comes as the Highway Trust Fund (HTF) faces a growing funding shortfall because the federal fuel tax, its primary revenue source, has not been indexed for inflation since 1993. The Zero Emission Transportation Association (ZETA) urges Congress to reject these consumer penalties and to instead pursue technology-neutral solutions that treat all drivetrains equally. An EV tax would stifle an ascendant industry set to create hundreds of thousands of jobs and restore the United States as a global leader in vehicle manufacturing.

“EVs are neither the source of nor the solution to the insolvency of the federal Highway Trust Fund. An EV tax is not an acceptable pay-for in any infrastructure plan and only penalizes the most fuel-efficient vehicles on the road,” said Joe Britton, the Executive Director of ZETA. “EV taxes are a brainchild of those who want to unfairly punish EV drivers and hinder clean vehicle deployment—which, to be clear, is a feature, not a bug, of this proposal from its backers.  At a time when we should be doing all we can to foster US EV manufacturing leadership, an EV tax would only further cede the economic potential of this industry to competitors like China and the EU. And if those drawbacks aren’t bad enough, we must recognize that this EV tax will do little to solve any real funding deficit.”

The HTF, which is funded by excise taxes on gasoline and diesel fuels, has not been solvent for decades. Since 2008, it has operated at a deficit of nearly $150 billion and is projected to incur another $150 billion in budget shortfalls over the next decade with or without additional EVs on the roads. An EV tax will do little to make up this deficit. The Congressional Budget Office found that an annual tax of $100 imposed on each EV in FY 2022–2026 would generate merely 1.6% of the HTF’s projected deficit.

In addition to the EV taxes’ inefficacy in generating revenue, they would pose further harm to consumers and the emerging EV industry, too. A recent analysis found that existing or proposed statewide EV taxes in twenty-six states would require EV drivers to unfairly pay more than they would pay annually in fuel taxes if they were driving an average new internal combustion vehicle (ICE) instead. An EV tax would additionally punish EV drivers because they already pay tolls, registration fees, and taxes that go into the general fund. Subsequently, these upfront EV taxes would have a chilling effect on EV adoption in the United States and perpetuate our reliance on polluting vehicles at a time when we should be seeking to increase efficiency and drive down emissions. A nationwide survey found that a $100 EV tax would have prevented the purchase of an EV in 11% of cases and 19% of purchases of plug-in hybrids.

ZETA encourages Congress to reject an EV tax in any infrastructure proposal. ZETA is supportive of studies on alternatives to fuel taxes, including a national pilot program for a Vehicle Miles Traveled (VMT) fee, which enjoys bipartisan support and was included in both the House and Senate versions of their Surface Transportation Reauthorization programs. VMT fees treat both ICEs and EVs equally to generate revenue using a “user pays” system, which will become increasingly important as the EV market share expands in the coming years.

ZETA will continue to advocate against an EV tax and urges lawmakers to support only those infrastructure proposals that include fair and equitable funding mechanisms to replenish the HTF.

Policy Platform

Learn about our six-part strategy for electrification.

About ZETA

National policies to support 100% electric vehicle sales.

The Zero Emission Transportation Association (ZETA) is a federal coalition focused on advocating for 100% EV sales by 2030. Enacting policies that drive EV adoption will create hundreds of thousands of jobs, secure American global EV manufacturing dominance, drastically improve public health, and significantly reduce carbon pollution.