Higher Registration Fees For Hybrid Vehicles – What’s Up With That?

Awhile back, a good friend of mine spent half an hour complaining to me about having to pay an additional $100 when he registered his Prius hybrid vehicle. That caused me to wonder why West Virginia would want to discourage the ownership of these vehicles with a whopping big tax.  Hybrids consume lots less gasoline and emit proportionately less greenhouse gasses from the tailpipe. That’s a good thing, right?  The answer, of course, is not so simple.

The additional registration fees for alternative fuel vehicles were first imposed in 2017.  Many states have done this.  In West Virginia, hybrid vehicles, which use a combination of gasoline and self-generated electric power, are charged an extra $100.  All-electric vehicles, which use no gasoline, are charged an additional $200.  This difference depending on whether gasoline is used turns out to be the key to understanding the policy behind these fees.

West Virginia, like all other states, uses gasoline taxes to fund the maintenance and expansion of its transportation infrastructure – roads, bridges, and the like.  West Virginia is one of only four states that has responsibility for maintaining both state and county roads.  In 2017 the combined state gasoline tax was raised to $.357 per gallon, where it remains today.  But still gasoline tax revenues have been declining for years, principally because of better fuel efficiency.

The gasoline tax is considered a use tax – until hybrid vehicles came along the gallons of gasoline sold were a rough measure of the use our highways and bridges were getting.  Because of increasing fuel efficiency driven by federal policy and alternative fuel vehicles, gasoline consumption can no longer be used as a proxy for highway use.

So it was no coincidence that both higher gasoline tax and the alternative fuel vehicle registration fees were imposed in the same year.  The objective was to even the burden of infrastructure maintenance on all vehicle owners.  When viewed this way, raising the registration fee for hybrid and electric vehicles seems fair.  And owners of these vehicles actually are better off than traditional gasoline vehicle owners if each drives the average annual mileage put on a West Virginia vehicle.

Here is the math.  I have seen several different figures for the average miles a vehicle is driven each year in West Virginia, but all of them are around 15,000.  Assume that a gasoline powered vehicle gets 25 miles per gallon, which would mean 600 gallons of fuel consumed per year.  The West Virginia tax on that gasoline would come to $214 per year.  What about the hybrid vehicle?  They get around 50 miles per gallon, so that would mean 300 gallons consumed on average per year.  The West Virginia tax on that would be $107 per year, saving this driver an equal amount per year versus the gasoline vehicle driver.  Against this tax, the additional $100 registration fee is a slight bargain.

It’s a similar bargain for all-electric vehicle drivers, who save the entire $214 in gasoline tax that a driver of a conventional vehicle would pay.  Against the $200 registration fee, the all-electric driver saves $14, enough to treat the kids to a couple of Big Macs. The higher registration fee really creates no financial disincentive for owning a hybrid vehicle, it just removes an incentive to do so.

Maybe hybrid owners should get an incentive as a matter of state policy.  An argument could be made that reducing tailpipe emissions is a worthy objective that is served by making ownership of a hybrid more attractive.  But this runs into that elusive concept of environmental justice.  If we eliminate the higher registration fees on hybrids, the cost of maintaining roads simply gets shifted to drivers who don’t own hybrids.  Maybe they own big gas guzzling trucks and deserve it.  But maybe they can’t afford to buy a Prius, which the last time I looked cost $25,000 for an entry model.  It is not good policy for a highway use tax to be converted into a tax on being poor.

Looking a little more skeptically at electric vehicles, when and why did we decide they were so good for the environment?  It might make us feel better about ourselves to drive one, but exchanging CO₂ emissions from gasoline for even dirtier emissions from generating electric power makes no sense.  A model developed at MIT shows that eliminating petroleum use by electrifying the whole transportation sector would cause the use of dirtier electric power to surge.  Overall emissions would drop only 2% by 2050.  And emissions from coal-burning power plants include lots of other bad stuff besides CO₂, like nitrous oxide and soot.

Tax policy is never simple, particularly when it is bound up with politicized environmental issues.  But at ground zero, my friend is never going to accept any of this.  He is just annoyed by having to pay a stupid tax on his hybrid Prius.  I can talk all I want, but I plan to make myself scarce next year when he registers his car again.