Owners of electric cars get a break on the gas tax. It's costing California $32 million
As most Californians reach deeper into their pockets to pay higher gas taxes for road repairs, electric vehicle owners have been getting a free pass. Many will continue to benefit under a little-known provision of the law, costing the state tens of millions of dollars annually and drawing objections from taxpayer advocates who say all who use the roads should pay their fair share.
With some provisions of Senate Bill 1 taking effect later this year, the tax breaks have reignited a debate from 2017, when the Legislature and then-Gov. Jerry Brown raised gas taxes by 17.6 cents per gallon and implemented an annual $100 fee for some zero-emission vehicles, effective July 1, 2020, to help pay for repairs to state roads and bridges.
The contentious law — which led to a failed repeal effort and the recall of a state senator who voted for the legislation — exempts all 100% electric and hydrogen-fueled cars with model years before 2020, amounting to more than $32 million in lost transportation revenues each year.
Lawmakers who approved the measure, including several who have benefited from the exemption, say they see a greater good in encouraging more people to drive cars that don’t pollute at a time when climate change is a deep concern.
But that reasoning has not swayed Jon Coupal, president of the Howard Jarvis Taxpayers Assn., which opposed Senate Bill 1. Coupal said many California workers would not get a tax break because they could not afford an electric car, which can run from $36,000 to more than $124,000.
“It’s reflective of policies that favor the elite and the wealthy in California relative to working-class Californians,” he said. “There are a lot of tradespeople who don’t drive electric cars. They drive gas-powered pickup trucks, and they are being punished by the highest gas prices in America.”
The annual $100 “road improvement fee” on zero-emission vehicles from SB1 was touted as a way to ensure that owners of the vehicles had skin in the game when it came to fixing the state‘s aging transportation infrastructure. But implementation of the fee was delayed after until July 1, 2020, and it applies only to vehicles of model year 2020 or later.
Some 320,000 zero-emission vehicles older than the current model year are registered with the DMV, including cars owned by at least eight legislators, four of whom were co-authors of the bill.
“Hypocrisy in politics? I’m shocked,” Coupal quipped.
Legislators say there is an important goal at stake. Brown set a target of having 5 million zero-emission vehicles on the roads by 2030, but with so few operating so far, some question whether the goal can be reached in time.
That concern colored the legislative debate over SB 1, as Democratic legislators insisted the gas tax increase was needed to address an estimated $78-billion backlog of repairs to the state’s crumbling system of roads and bridges.
The measure signed by Brown raised the gas and diesel taxes and vehicle registration fees to bring in an estimated $5.2 billion annually to improve roads and mass transit.
But taxing vehicles that don’t use gas has proved politically challenging. State leaders have spent years trying to encourage Californians to buy electric cars, offering subsidies worth up to $5,000 and other incentives, including access to high-occupancy-vehicle lanes for single-passenger ZEVs.
The exemption was part of a compromise aimed at avoiding opposition to SB 1 by environmental groups and like-minded legislators who wanted protections for zero-emission cars as part of efforts to combat climate change, said state Sen. Jim Beall (D-San Jose), the author of the bill.
“There are two important principles,” said Beall, who is chairman of the Senate Transportation Committee. “The first is that everyone who uses our roads should pay for their upkeep. The second is that we need to continue supporting our efforts to address climate change. The ZEV provision reflects a compromise which honors both.”
Groups that urged lawmakers to provide tax breaks to zero-emission cars included Sierra Club California and Plug In America, a Los Angeles advocacy group for electric cars. The tax waiver on pre-2020 vehicles will help reach the state goal to boost zero-emission vehicles on California roads, said Joel Levin, Plug In America’s executive director, who noted that he would have preferred a longer delay for the fees on new electric cars.
“There is a public benefit to having EVs on the road because they help to clean up the air, so the state wants to incent[ivize] people to drive EVs,” Levin said. “When you are charging a fee, that is a little bit of a discouragement to driving those vehicles.”
Levin said a move to charge the $100 annual fee to current electric car owners after giving them a government subsidy would be inconsistent.
“You are giving money with one hand and taking away money with the other,” he said, adding that his group “philosophically understand[s] that you need to take care of the roads and that EVs should be part of that discussion.”
The California League of Conservation Voters also would have opposed SB 1 if tax breaks for electric cars had not been included, said Chief Executive Officer Mary Creasman. The group ended up neutral on the bill but later defended it by opposing a 2018 ballot measure that sought to repeal the gas tax.
Creasman said state officials weren’t doing enough to increase the number of electric vehicles on the road and that taxing the existing cars would not have helped.
“It’s a huge problem, and it’s one our biggest focuses as an organization, because as we know climate change is here and over 40% of carbon emissions comes from the transportation sector,” she said.
Supporters of SB 1 deny that electric car owners are getting a free ride. They note that owners of zero-emission vehicles exempt from the $100 fee still pay annual vehicle registration fees charged to all car owners, including another levy in SB 1 that goes to road repairs.
Though Beall does not own a zero-emissions vehicle, several co-authors of the bill do. Assembly Speaker Pro Tempore Kevin Mullin of South San Francisco drives a Chevy Bolt he bought in 2018, and state Sens. Jerry Hill (D-San Mateo) and Bill Dodd (D-Napa) bought Teslas in 2017 and 2018, respectively.
Mullin and Dodd noted they purchased their ZEVs after the bill was approved.
“Climate change is an existential threat, and vehicle emissions account for the lion’s share of carbon going into the atmosphere,” Dodd said. “As someone who drives 30,000 miles a year, representing six counties and 22 cities, I feel it is incumbent on me to model the change we need.”
Another supporter of the bill, Sen. Ben Allen (D-Santa Monica), and his wife own a Nissan Leaf they bought in 2016, according to spokeswoman Allison Towle.
“Sen. Allen spent his political capital fighting for transit funding in SB 1, not a tax break” for his family’s car, Towle said.
Hill said there was an argument to be made for existing owners of electric vehicles paying the $100 fee and he was willing to do so, but the exemption was kept in the bill at the insistence of then-Gov. Brown. In a 2017 public hearing with Brown, Hill acknowledged that he had an electric car, and he questioned not immediately charging the $100 fee.
“They are using the roads,” Hill told Brown, referring to electric car owners, adding they were “wearing out the roads as we go.”
Brown told Hill and other legislators that putting off the fee was justified at a time when too few zero-emission vehicles were on the road.
“We want to give as much of a boost as we can,” Brown said at the hearing. “We do think they should pay, but we are so in our infancy in zero-emission cars, it’s really just a way of trying to provide a little subsidy for a couple of years longer.”
In the end, Hill voted for the bill, calling the overall package “reasonable.”
In addition to delaying the fee until after July 1 for models from years 2020 and later, it also waived the fee for the first purchase of those cars, meaning many will not pay it until 2021.
SB 1 was opposed by most Republican lawmakers, including Assemblyman Vince Fong of Bakersfield, who offered an alternative proposal without tax increases. Fong, who drives a gas-powered car, said the public would be frustrated that many electric car owners were not paying the new road improvement fee.
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“Sacramento picking winners and losers — that was the whole debate on SB 1,” said Fong, who is vice chairman of the Assembly Transportation Committee. “I think ZEV owners need to be part of the solution” of fixing roads.