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Indiana is adding electric vehicle charging stations, but makes EV owners pay a fee. Why?

By Rebecca Thiele

Posted June 6, 2023

On average, gasoline taxes make up 40 percent of a state's transportation trust fund. It's 57 percent in Indiana, according to the Indiana Department of Transportation. (Pixabay)

Indiana will have a lot more places for electric vehicles to charge up in the coming years — both from federal efforts like the National Electric Vehicle Infrastructure program and the state's settlement with Volkswagen. Advocates hope this will encourage more Hoosiers to buy electric cars.

But if that's the goal, then why does Indiana impose a special fee on electric car owners? A member of our audience wanted to know.

The answer has to do with the way Indiana funds its roads — mainly through gasoline taxes. Because electric vehicles don’t use gas, Indiana imposes an annual registration fee on electric car owners. Starting in July, that fee will be more than $200.

Kaylee May is the development and communication manager for the nonprofit Greater Indiana Clean Cities. She said while the fee ensures electric car owners also pay for roads, it’s not very fair — especially for EV drivers that just drive locally.

“In your traditional gasoline vehicles, if you're driving less, you're buying less gasoline — so you're paying less taxes. However, with your EV you're paying that price upfront, so there's no adjustment depending on your driving habits," May said.

Rep. Carey Hamilton (D-Indianapolis) is on a state commission that studies how Indiana can grow electric car manufacturing and EV jobs, among other things.

Hamilton has authored two bills in the past to get rid of the fee. She said even removing it temporarily could help encourage Hoosiers to buy electric cars.

“We should be sending signals to our citizens, to prospective employers, to the marketplace that we are friendly to electric vehicles. And having a significant fee on the purchase of those vehicles is not a positive signal," Hamilton said.

Join the conversation and sign up for the Indiana Two-Way. Text "Indiana" to 73224. Your comments and questions in response to our weekly text help us find the answers you need on statewide issues, including this series on climate change and solutions.

Hamilton said unlike Indiana, many states also provide tax credits for buying electric vehicles.

Douglas Shinkle is the transportation program director for the National Conference of State Legislatures. He said, on average, gasoline taxes make up 40 percent of a state's transportation trust fund. It's 57 percent in Indiana, according to the Indiana Department of Transportation.

Shinkle said revenue for roads is already going down as cars get more fuel efficient. That, combined with inflation and rising construction costs, means we could see worse roads in the U.S. if we don’t come up with a sustainable way to fund them.

“No one likes congestion. People want safe roads. They want investments in their community. They want nice — good sidewalks. They want good lighting. They want good signage. All these things are important," Shinkle said.

Greater Indiana Clean Cities's Kaylee May said a more equitable option to pay for roads might be to look at vehicle miles traveled. Electric vehicle owners in states like Oregon, Utah and Virginia already have the option to test this out in voluntary programs.

Shinkle said some states have also explored making EV owners pay a fee for every kilowatt hour of energy they use at public charging stations. But he said that might not generate as much revenue over time — since many EV owners can charge their cars at home.

"There's some kind of associated fairness concerns with that because if you live in an apartment or you just don't have access to an in-home vehicle charger, you're going to have to pay that fee versus someone in their home," Shinkle said.

CLARIFICATION: A previous version of this story didn't mention that the electric vehicle fee was an annual registration fee. For the purpose of clarity, that has been added.

Rebecca is our energy and environment reporter. Contact her at rthiele@iu.edu or follow her on Twitter at @beckythiele.