Will electric vehicles pay their fair share for Minnesota's road costs?

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Steve Whiteman of Mankato was gassing up his car recently when an electric vehicle pulled up at the service station and plugged in nearby.

This got him thinking: If he's paying a gas tax for the fuel his car consumes, what do electric vehicle (EV) owners pay given that their vehicles don't use gas? And if gas taxes help fund Minnesota's roads and bridges, shouldn't EV owners pitch in for that, too?

Whiteman and several other readers sought answers about this quirk of highway finance from Curious Minnesota, the Star Tribune's reporting project fueled by great reader questions.

The question will likely become more pressing in the future as more Minnesotans buy electric vehicles — whether they're all-electric or hybrid models.

EVs are fast becoming mainstream, if the volume of advertising during the Super Bowl last weekend is any indication. Of the seven automakers that ran a TV ad during the world's most-watched sporting event, six featured an EV, according to Cars.com

So, let's do the math.

Minnesotans pay 28.5 cents a gallon in state fuel taxes — money that may only be used for roads and bridges, according to the state constitution. We also pay 18.4 cents per gallon in federal gas taxes.

EVs don't consume gas, but owners do pay an annual $75 fee in lieu of the state gas tax.

"Seventy-five dollars doesn't seem like enough," Whiteman observed.

Some Republicans at the state Capitol would like to increase that annual fee to $229 a year for all-electric vehicles and half that amount for plug-in hybrids.

'A fair amount'

But the gas tax is merely one way that vehicle owners help pay for road maintenance.

Like owners of traditional vehicles, EV owners pay the motor vehicle sales tax when they purchase the car or truck, as well as annual license tab renewals. They also pay the state sales tax. All contribute to the state's fund that is allocated to road maintenance and construction.

The average price of an EV — $52,486, according to Kelley's Blue Book — is about $10,000 more than a comparable gas-powered vehicle. As a result, EV owners tend to pay more in motor vehicle sales tax and tab renewal fees. So the Minnesota Department of Transportation (MnDOT) says that it all evens out in the end — at least for now.

"The way we're viewing things at the moment is that EVs in general are paying a similar amount or more when compared to a gas-powered vehicle," said Tim Sexton, MnDOT's assistant commissioner for Sustainability and Public Health.

But MnDOT is keeping an eye on the situation, especially because the state gas tax accounts for more than a third of the state's roads and bridges fund. That amounted to $846 million in the 2021 fiscal year.

"It's important for us to be able to maintain our system, and we want to make sure that all vehicles are contributing a fair amount," Sexton said in an interview.

EVs account for less than 1% of the vehicles currently registered in Minnesota. But that number will likely increase in coming years as automakers introduce more EV models, prices for the vehicles decline, and public charging infrastructure expands across the state.

A new kind of fee

The annual fees charged to EV owners across the country vary from $50 to $225, according to the National Conference of State Legislatures. Some states such as Utah and Oregon charge a fee by the mile, until a specified amount is reached.

Rep. Steve Elkins, DFL-Bloomington, has introduced legislation at the Capitol that would eliminate the $75 fee and create a new mileage-based fee. That would likely rely on a tracking device in the vehicle, similar to programs in Utah and Oregon. The fee would be adjusted each year, so the amount collected would be on par with gas tax revenue.

"I have an EV myself and I want to pay my fair share, but not more than my fair share," said Elkins, who owns a Tesla.

But others, like Rep. Pat Garofalo, R-Farmington, have privacy concerns. He questions whether the state should know our itineraries. (Elkins notes the fees would be collected through a secure, third-party vendor.)

Garofalo, who also owns a Tesla, is in favor of diverting existing sales tax on electricity to support road maintenance. But for now, he's OK with the $75 flat fee.

"We have a $7.7 billion surplus," he said. "We shouldn't be looking at new taxes or fees."

Whiteman — the reader who asked this question — said he was surprised there was so much debate about EVs, gas taxes and paying for road maintenance.

"It seems pretty involved," he said.

If you'd like to submit a Curious Minnesota question, fill out the form below:

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