Operating an electric vehicle doesn’t offer the tax evasion you anticipated.
It amuses me when individuals complain about “the authorities.” In very few nations globally is there a less united, less structured governing system than in the U.S. And, in only a few regions is that structure so entirely contradictory within itself. I’m not referring to political ideologies; I’m discussing diverse units of government striving to achieve wholly conflicting objectives. We are not under “the authorities,” but under numerous bureaucratic subunits, none of which cooperate well enough to ever act in a genuinely conspiratorial manner. Before I proceed, contemplate this:
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Government Levies and Electric Cars
Levying Realities
- Illinois hosts 6963 taxing entities, the highest among all states.
- (As an Illinois dweller, I’m curious about what the Salt Creek Park District is. Given that there is no actual town named Salt Creek—although Salt Creek exists—it seems logical that the parks managed by this institution could be overseen by the municipalities in which they are situated. Label me eccentric. But that is a digression.)
- There are 91,000 governmental entities in the U.S.
- From the $700 billion in annual gasoline sales in the U.S., the federal government acquires roughly $40 billion in tax earnings.
- Most regions in the U.S. impose federal, state, county, and city taxes on gasoline. These taxes tend to be higher if the fuel is diesel or not blended with at least ten percent ethanol.
- About 40% of the price of a gallon of gas constitutes tax.
- Electric vehicles do not require gas (remember this fact).
Utility Tax
Frequently referred to as a “utility tax,” gasoline taxes generate revenue for numerous purposes, including roadway and highway upkeep, airport upgrades, and, paradoxically, federal tax rebates for electric vehicles.
I describe this as paradoxical because the government encourages the procurement of vehicles that won’t contribute to public coffers via gasoline taxes. Similarly, government entities facing potential losses in gasoline-tax revenue are looking to compensate for that shortfall by, as expected, taxing electric vehicles.
Citizens of Illinois encounter some of the most elevated gas taxes across the nation. Despite California’s higher specific tax per gallon ($.779 compared to .665), individuals in the Prairie State are also subject to the state’s standard sales tax ($.025).
Gasoline Charges
Here’s a brief overview of the per-gallon taxes applied to gasoline purchases in Chicago City:
- Federal: $.184
- Illinois: $.665
- Cook county: $.51
- Chicago: $.08
In addition, Chicago gas is subjected to the aforementioned standard Illinois sales tax, which sums up to approximately $.25 for a gallon priced at $3.75.
This implies that the transition from a gas-consuming vehicle averaging 25 mpg to an electric car results in a loss of approximately $900 annually in gasoline-tax revenue for the government. Moving from a vehicle with a 20 mpg average raises the deficit in gas-tax income by approximately $1150.
EV Impositions
Although this revenue is dispersed among various entities, the loss remains consistent, and the necessity to replenish those funds is pressing.
We’ve witnessed states increasing the registration fees for EVs. Based on our tally, 16 states have doubled the registration expense for new electric vehicles in comparison to conventional gas-powered cars or trucks. Particularly, the state of Washington charges car owners $75 for registering their traditionally powered vehicles, but demands $225 from EV owners.
Furthermore, the prospects appear bleak for EV possessors, who will inevitably grow in number. Taxing vehicles—and automobile-related entities—has evolved as a relatively simple approach to filling the voids in governmental budgets—reminiscent of taxing tobacco and alcoholic beverages. Transitioning to electric vehicles won’t shield EV proprietors from the anticipation that their eco-friendly drives will generate equivalent contributions to institutional coffers. What else could be subject to taxation? We appreciate your inquiry:
- Public charging facilities
- Electricity consumptions
- City permits
- Vehicle license plates
- Substitute batteries
Fiscal Deficiencies
Rumors of a supplemental electricity tax for EV owners are circulating. Let’s hope it remains just talk, but from a lawmaker’s standpoint, a charging taxation (home or public) could substantially alleviate financial gaps, albeit at the direct expense of those circumventing gasoline taxes.
Reflections
We are not insinuating that “the authorities” harbor deceitful motives in their endeavor to tax EVs; we are merely highlighting the apparent inconsistency of enticing Americans to invest in electric cars on one end and subsequently scrambling to devise methods to extract contributions from EV possessors to offset lost gasoline-tax returns.
Note: We are by no means attempting to dissuade anyone from purchasing an electric vehicle. Moreover, if you have access to home charging for your vehicle, you will experience tangible savings in terms of “fuel” expenses. Our suggestion is that, given ample time, Uncle Sam and his myriad regional counterparts will inevitably devise strategies to extract a commensurate amount of tax revenue from EV owners as they currently derive from owners of traditional vehicles.
Therefore, if your EV was accompanied by the $7500 federal tax credit, relish it. Alternatively, consider stashing a portion of it away; the time will eventually come when you will require it. And, “the authorities” will seek it.
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