The First Fuel Tax Developments of 2020

CHICAGO — States are increasingly moving beyond simple cent-per-gallon (CPG) increases to their motor fuel taxes to raise funding for roads, with vehicle miles traveled (VMT) programs and special fees for electric vehicles (EVs). This is as more fuel-efficient vehicles have eroded the gas tax’s ability to support transportation infrastructure repairs and maintenance.

Here are the latest developments from several states seeking to keep up with road costs ...

In Oregon, the gasoline tax rose 2 cents per gallon (CPG) on Jan. 1, 2020, in the second of four increases that will boost the tax by 10 CPG by 2024 as part of the Keep Oregon Moving transportation funding program, KLCC reported. This would raise the state’s gas tax to 40 CPG.

Oregon is also offering drivers of fuel-efficient vehicles the chance to pay a lower registration fee if they enroll in its OReGO VMT program, which charges a 1.5-cent-per-mile fee. Participants receive a credit for any gas tax paid at the pump.

In December, Washington's Transportation Commission adopted recommendations on how the state can begin transitioning from a gas tax to a road usage fee. The commission is advising “a slow and gradual transition away from the gas tax,” beginning with requiring state-owned vehicles to pay a road usage fee and levying a road usage charge to EV and hybrid vehicle owners. The commission’s final report and recommendations will be sent to Gov. Jay Inslee, the state legislature and Federal Highway Administration for consideration this month.   

Four bills are before the Missouri legislature that aim to increase the state’s 17-CPG gas tax, which hasn’t been raised in more than two decades, The Columbia Missourian reported.

Three of the four bills would put a gas-tax increase on the ballot. Each varies by its proposed increase and timeline, ranging from one that would increase the gas tax by 2 CPG by 2021 and tie it to inflation; or by 6 CPG by 2023; or by 10 CPG by 2025.

In 2018, voters rejected a ballot initiative that would have increased the motor fuels tax by 2.5 CPG for four years.

The fourth bill would raise the tax to 19 CPG in January 2021 until Dec. 31, 2030, and then lower the tax to 18 CPG.

In 2019, Michigan Gov. Gretchen Whitmer failed to move her proposal to increase gas taxes by 45 CPG, which would have raised $2.5 billion annually, including $1.7 billion earmarked for road repair; however, her administration is working on a new proposal for 2020 to increase road funding that “will be a substantial step forward,” according to The Detroit News, although Whitmer has yet to provide details.

Following in the footsteps of Oregon, Utah is piloting a VMT fee program, with a focus on alternative vehicles, The Salt Lake Tribune reported. Participants will pay a fee for each mile driven, which will be measured by a transponder and paid automatically by credit card linked to an account.

Participation in the VMT pilot is limited to owners of the approximately 51,000 electric and hybrid vehicles registered in Utah. Drivers will also use a smartphone app to help track their trips and mileage. As a sweetener for participating in the program, these drivers will have the opportunity to lower their vehicle registration fees—which are increasing in 2020.

At least eight states are introducing or increasing registration fees on EVs in 2020, AP reported. The new fees range from $50 in Hawaii to $100 in Kansas and $200 in Alabama and Ohio. This year will also mark the first time that most U.S. states levy a special fee on vehicles that do not run on gasoline.

Oregon and Utah are increasing EV registration fees, although both offer discounts to participants in their VMT tax programs. Iowa began charging an annual EV registration fee that begins at $65 in 2020 and rises to $130 in 2022. This is as EV-charging infrastructure begins to roll out across the state. Illinois raised its two-year, $35 license plate fee for EVs to an annual $248 fee. And beginning in July, buyers of new “zero-emission” vehicles in California, home to nearly half of EV sales in the United States, must pay a $100 fee.