Electric and hybrid vehicle owners should prepare for a big, beautiful tax increase.
The text of President Donald Trump’s “big beautiful bill,” which passed the U.S. House of Representatives early Thursday, contains a provision that would impose a new annual registration fee on electric and hybrid vehicles, a move that experts say will disincentivize purchases of zero- and low-emission vehicles across the country.
The legislation outlines fees of $250 a year for EVs and $100 a year for hybrid vehicles, to be imposed by the Federal Highway Administration. If passed by the Senate, the law would also require the fees to increase in line with inflation.
By proposing a new registration fee for EVs, Congress is following the lead of a number of states seeking a way to make up for lost gasoline tax revenue as more and more drivers turn to electric transportation.
Both states and the federal government rely heavily on gasoline taxes for construction and maintenance of roads and bridges. The average gasoline car driver will pay about $279 per year in federal gasoline taxes this year, based on gas at $3.10 per gallon, the average price that federal energy forecasters have projected for 2025. (According to the American Petroleum Institute, the average U.S. driver purchases 489 gallons of gasoline per registered vehicle annually, and the federal highway tax is 18.4 cents per gallon.)
Thirty-nine states now require a special registration fee for EVs or other alternative fuel vehicles, ranging from a low of $50 in Colorado to a high of $290, planned in New Jersey to start in 2028, according to the National Conference of State Legislatures.
But some energy economists have argued that imposing high registration fees for EVs is not a good way to address funding of highway costs, because it discourages EV purchases. Instead, they have analyzed other approaches that would be more technology neutral, like charging all drivers a fee based on how many miles per year they travel.
The new registration fees would be imposed on top of these existing state charges, further penalizing those drivers who choose to drive hybrids and EVs.
Daniel Tait, who leads Energy Alabama, a nonprofit organization that has advocated for clean energy in the state for more than a decade, said the newly proposed fees are a bad idea.
“These proposed registration fees would be new taxes that not only hurt regular people trying to save on gas, they are a direct threat to Alabama’s burgeoning EV manufacturing sector,” he said. “For a state that has invested heavily in becoming a leader in EV production, this move is not just counterproductive, it’s economically reckless.”
Alabama already imposes an annual registration fee of $200 for each electric vehicle and $100 for each plug-in hybrid vehicle, according to its Department of Revenue. The fees were first imposed on Jan. 1, 2020, with a $3 increase beginning in 2023 and every fourth year after.
“Added to Alabama’s existing EV registration fees, which are already among the highest in the nation, these new proposed federal fees would create a hostile environment for EV adoption,” Tait added. “This not only discourages consumers from purchasing EVs but also sends a negative signal to manufacturers considering investment in the state.”
The proposed EV and hybrid fees come as governors from 11 states have announced a concerted effort to “sustain America’s transition to cleaner and more affordable cars.”
On Friday, the U.S. Climate Alliance announced that 11 of its member governors have launched the Affordable Clean Cars Coalition, an effort to resist actions aimed at rolling back electrification of the transportation sector that they say “undermine American competitiveness in the global automotive market and constrain innovation.”
“The federal government and Congress are putting polluters over people and creating needless chaos for consumers and the market, but our commitment to safeguarding Americans’ fundamental right to clean air is resolute,” the group said in a statement.
So far, Republican supporters of the president’s “big beautiful bill” have remained mum on the fee increase, instead touting the legislation as critical to cutting taxes.
“The House did its part,” Sen. Tommy Tuberville (R-Ala.) posted on social media. “We must pass meaningful tax cuts and help hardworking Americans ASAP before the 2018 tax cuts expire.”
The White House did not immediately respond to questions about how the proposed increase aligns with its goal of lowering taxes for Americans.
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Lee Hedgepeth
Reporter, Alabama
Lee Hedgepeth is Inside Climate News’ Alabama reporter. Raised in Grand Bay, Alabama, a small town on the Gulf Coast, Lee holds master’s degrees in community journalism and political development from the University of Alabama and Tulane University. Lee is the founder of Tread, a newsletter of Southern journalism, and has also worked for news outlets across Alabama, including CBS 42, Alabama Political Reporter and the Anniston Star. His reporting has focused on issues impacting members of marginalized groups, including homelessness, poverty, and the death penalty. His award-winning journalism has appeared in publications across the country and has been cited by the New York Times, the Wall Street Journal and the Washington Post, among others.
Marianne Lavelle
Bureau Chief, Washington, D.C.
Marianne Lavelle is the Washington, D.C. bureau chief for Inside Climate News. She has covered environment, science, law, and business in Washington, D.C. for more than two decades. She has won the Polk Award, the Investigative Editors and Reporters Award, and numerous other honors. Lavelle spent four years as online energy news editor and writer at National Geographic. She spearheaded a project on climate lobbying for the nonprofit journalism organization, the Center for Public Integrity. She also has worked at U.S. News and World Report magazine and The National Law Journal. While there, she led the award-winning 1992 investigation, “Unequal Protection,” on the disparity in environmental law enforcement against polluters in minority and white communities. Lavelle received her master’s degree from Columbia University Graduate School of Journalism, and is a graduate of Villanova University.
