If you own an electric or hybrid vehicle in Michigan, expect to chalk up an extra $100 or $50 respectively on your birthday next year. Where’s the extra money going? To the state’s roads.
A portion of fuel taxes and annual vehicle registration fees currently contribute to the state’s road fund. Under the recently passed state budget, sales tax on gas will be eliminated. A replacement fuel tax to pay for the state’s roads will increase though, from $0.31 per gallon to $0.51 per gallon. That’s more money for roads, with no change for drivers of conventional gas-powered vehicles.
Current state law though, requires annual EV and hybrid registration fees to increase by $5 for EVs and $2.50 for hybrids, for every one-cent increase in the fuel tax.
Since fuel taxes are increasing, EV registration fees will also increase, Sophia Schuster from the Michigan Energy Innovation Business Council, said.
“Because of how the EV tax is tied to the gas tax, that's where that other $100 is getting added in, because we're seeing a 20 cent increase to the gas tax," she said.
This change will bring in a little over $8 million in extra revenue for road funding, Schuster said.
“And so it's really a drop in the bucket compared to what actually needs to get raised for Michigan's roads,” Schuster said. “Michigan's communities are not going to realize significant benefits from this change, but EV drivers are going to be significantly impacted every single year.”
Schuster said EV drivers are already paying about $20 more for roads on average than gas-powered vehicle drivers. Some critics have argued EV drivers weren’t paying their fair share toward road funding, since they don't need to buy gas.
“When you look at really how the gas tax, the now soon to be former sales tax on gasoline, how all of that actually funneled into roads, that's where EV drivers were already paying more than [internal combustion engine] vehicle drivers, and so this change to the gas tax is going to lead them to pay about $120 more every year,” Schuster said.
“Unfortunately, I think that the impact to EVs was an unintended consequence of what needed to happen to get the road package passed,” Schuster said.
The increases will take effect on January 1, 2026.
