New Jersey’s EV Drivers are Getting a Free Ride - Garden State Initiative

New Jersey’s EV Drivers are Getting a Free Ride

Gas Tax, Transportation, GOVERNMENT THAT WORKS

New Jersey’s EV Drivers are Getting a Free Ride

William J. Smith, GSI Staff   |   July 11, 2023


As the state’s annual budget process is now in the rearview mirror, some attention is due to an emerging issue for next year in Trenton – a reauthorization of the state’s Transportation Trust Fund (TTF), which finances the annual capital program of the New Jersey Department of Transportation and NJ Transit.

The TTF was signed into law by Gov. Thomas H. Kean in 1984 to provide, via a 2.5 cent gas tax, a stable and dedicated funding source for transportation projects. The most recent authorization, in 2016, resulted in a significant increase in the gas tax to fund these capital projects and keep the TTF solvent.

One issue that is likely to be front and center in the upcoming debate is who is not paying the gas tax – the owners of Electric Vehicles (EV), which continue to grow in popularity.  Currently in New Jersey, those drivers do not contribute a cent to the maintenance and upgrade of New Jersey’s roads via the gas tax.

Among the ideas that have been floated across the country is a mileage tax, which would require monitoring of how many miles a vehicle drives, but comes with a myriad of issues, including accounting for miles driven out of state and unfairly penalizing low wage earners without access to public transit who are dependent on vehicles for significant commutes.

So, what is the answer to ensuring that New Jersey’s EV owners, who tend to be among higher incomes earners, contribute a fair share to maintain our roads and transit?  After all, EV owners are exempted from the state’s sales tax and can receive thousands of dollars in subsidies from the state to finance their purchase.

One answer is an annual fee on EV owners to help support the TTF. According to the National Conference of State Legislatures (NCSL), at least 32 states require a special registration fee for EVs, with 19 of those states also assessing a fee on plug-in hybrid vehicles. According to the NCSL, annual fees for EVs range from $50 in Colorado, South Dakota and Hawaii to $225 in Washington. Alabama, Arkansas, Ohio and Wyoming all enacted bills in 2019 setting or increasing fees for electric vehicles to $200 annually. The fees for hybrid vehicles range from $48.75 in Iowa, as of 2021, to $100 in Alabama, Arkansas, Ohio and West Virginia.

Closer to New Jersey, neighboring Pennsylvania is currently considering a plan to charge an electric vehicle fee of $380 per noncommercial electric vehicle and $450 per commercial electric vehicle, with the sponsor noting the bill will “ensure electric vehicle owners are paying their fair share towards the Commonwealth’s transportation infrastructure, just as individuals who drive gas powered vehicles contribute towards fuels taxes.”

While the fee Pennsylvania is considering is significantly higher than other states, it should be noted that its’ gas tax is the highest in the nation, with New Jersey in a tie for 4th highest. So, in a similar system what fee would New Jersey EV drivers expect to pay? In a 2021 study for GSI, transportation policy experts were able to determine down the county level, what an average resident could expect to pay in gas taxes each year, ranging from a low of $179  annually in Passaic to a high of $455 in Hunterdon.

As the TTF negotiations begin, one thing should be crystal clear to the Governor and legislative leaders, it is time to take a more equitable approach to funding our infrastructure – with EV owners in the equation.