EV owners under fire from unfair tax proposal

Months after his predecessor bailed out the U.S. auto industry, President Barack Obama gave the entire industry another handout in the form of a tax credit for purchasing electric vehicles.

The EV tax credit was meant to offset the high production cost of the vehicles, which were making them more expensive for customers. President Joe Biden expanded the program during his tenure, but once President Donald Trump's "big beautiful bill" passed, the up to $7,500 in tax credits expired in September 2025.

The tax credits worked, given that 2025 was a record year for EV sales. But once the calendar flipped to October, EV sales cratered without the tax incentive.

Now, not only are the tax credits gone, but a bipartisan Congress is also considering a new tax on EV buyers that they haven't had to pay before.

Advocates of the tax, introduced as a bipartisan bill this week, claim it will force EV and hybrid plug-in owners to pay their fair share toward road maintenance. Industry and environmental groups are crying foul, saying the new tax is yet another cost added onto EV ownership.

Congress introduces bill to raise taxes on EVs and hybrids

The bipartisan House Transportation and Infrastructure Committee's BUILD America 250 Act "ensures that electric vehicle owners begin paying their fair share for the use of our roads," according to Rep. Sam Graves (R-MO), who is chairman of the committee.

Meanwhile, his fellow committee member Rep. Rick Larsen (D-WA) said that his side of the aisle "worked to make sure that this new fee on EVs is fair and not punitive. A commitment to bipartisan lawmaking means finding compromise," he said, according to the New York Times.

The bill would impose an annual $130 registration fee for electric vehicles and a $35 fee for plug-in hybrids. According to the Zero Emission Transportation Association, most Americans paid between $73 and $89 a year in federal fuel taxes, making the proposed fee substantially higher for EV owners than for other drivers.

"This unduly penalizes people for making that choice," Albert Gore III, executive director for Zero Emission, told the Times. "I don't argue that the number should be zero, but the number should be fair."

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At least 41 states already impose annual fees on EV owners, with fees ranging from $50 in Colorado to $260 in New Jersey (the New Jersey fee is set to rise to $290 in 2028). Meanwhile, the federal gasoline tax of 18.4 cents per gallon has not risen since 1993 and the diesel tax is 24.4 cents per gallon.

Gas and diesel tax revenues go into the Highway Trust Fund, which is the primary federal funding source for U.S. road construction, bridge repairs, and mass transit systems.

The legislation would also abolish the federal Carbon Reduction Program that provides funds for municipal projects that reduce greenhouse gas emissions, like bike paths, traffic management systems, and electric vehicle charging stations.

"This bill would impose an onerous new fee on electric vehicles and plug-in hybrids, while slashing investments in new E.V. chargers," Shruti Vaidyanathan, director of transportation advocacy, climate and energy at the Natural Resources Defense Council, also told the Times. "This bill largely ignores the need to build cleaner, more affordable transportation options."

Downturn in EV sales hurts the auto industry

While U.S. EV sales reached record highs in 2025 during the first half of the year, much of that growth was driven by the expiration of the $7,500 EV tax credit in September.

By the end of the year, sales had dipped 4% to 1.8 million units, despite global EV sales rising 20% year over year to 20.7 million units, according to Benchmark Mineral Intelligence.

"The vast majority of EVs sell at a rate of far less than 2,000 units a month, or 6,000 units a quarter. In the volume-driven business of automotive manufacturing, low volume is the enemy; EV profitability remains a distant dream for nearly every automaker," Cox Automotive said at the time.

Once the incentives dried up, the industry's record-setting pace soon became a distant memory, leading companies to write down EV losses. Ford wrote down $19.5 billion, while GM said it recognized up to $8.7 billion in EV-related charges and write-downs in 2025.

"October marked a sharp reversal for the electric vehicle (EV) market as the expiration of the federal EV tax credit cooled demand after three months of accelerated sales," said Stephanie Valdez Streaty, director of industry insights for Cox Automotive.

"Buyers rushed to secure incentives before the deadline, but once it passed, momentum slowed. Inventories climbed quickly, and pricing shifted upward for both new and used EVs, reflecting a market in transition."

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This story was originally published May 20, 2026 at 7:03 PM.