New Report Says Electric Vehicles Will Hurt Illinois State Revenue

Jan. 17, 2023
Illinois loses money with electric vehicles not contributing to the gas tax

According to a new report from the Illinois Economic Policy Institute (ILEPI), titled "The Impact of Electric Vehicles and Increased Fuel Efficiency on Transportation Funding", there is a potential steep decline in transportation revenue as the process of integrating electric vehicles (EV) in the states economy continues.

llinois relies on the motor fuel tax for 52% of its funding for roadwork and transportation projects, and 82% of its contributions to the federal highway trust fund.

EV adoption has been accelerating in the state, with a 439% increase in EV registrations between 2017 and 2022.

"While Illinois' transportation system maintenance and modernization efforts were supported through its historic Rebuild Illinois plan, the higher CAFE standards and increased reliance on electric vehicles will present a longer-term fiscal challenge for policymakers," said report author and ILEPI Transportation Director Mary Tyler.  

To offset the projected losses in revenue, the state has enacted a number of measures as part of its Rebuild Illinois plan, which includes raising the license registration fee for EV drivers from $150 to $250, annually; raising the state’s motor fuel tax; and raising the title and registration fees for gas-powered vehicles.

The study found that even with those measures in place, the average driver contributes $187 annually to the state through motor fuel taxes, while the average EV driver contributes $100 a year.

"While the expansion of EV infrastructure will create thousands of good paying jobs across our state, it will ultimately translate to less spending on motor fuels, at a ten-year projected impact of $1.1 billion to transportation revenues," Tyler said.  "Additionally, the combined effect of both EVs and improved fuel economy, while good for consumers struggling with rising prices and good for the environment, will have a $4.3 billion impact on the overall fuel consumption that generates transportation project revenue over the next decade."

To address potential funding shortfalls, Tyler said the state could consider replacing motor fuel tax with a “miles traveled” fee, increasing the EV registration fee, or adding a per kilowatt hour tax on public EV charging stations.


Source: The Illinois Economic Policy Institute

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