Kentucky electric cars now pay two taxes where gas cars only pay one

As of January 1st, Kentucky has implemented not one but two new taxes on electric vehicles, both of which are individually higher than what gas vehicles pay on similar units of energy.

Kentucky has joined the trend of overtaxing EVs and letting gas cars get off without paying their fair share for the damage they cause to roads and your lungs, but it has gone beyond most other states and is now implementing two new taxes on EVs at the same time, while keeping gas taxes artificially low compared to the damage gasoline causes.

First, EVs will have to pay an additional $120 registration fee every year, over and above the normal registration fees for all vehicles. Kentucky isn’t the first state to implement such a dumb fee, with similar punitive taxes existing in a majority of US states at this point.

We’ve covered many times before how misguided these taxes are, not least of which because they are the result of a cynical lobbying ploy by the oil industry to disadvantage an objectively better transportation option. Kentucky’s fee is lower than that of many other states, but it still taxes EVs at a much higher rate than a similarly-efficient gas vehicle (a ~140mpg gas car, if it existed, would pay ~$30 in gas taxes in a year if driven 15k miles, but a 140mpge EV, which there are multiple of, pays $120 no matter the mileage). As a flat fee, it also adds a small disincentive for drivers to remain low mileage, which doesn’t help with congestion or road usage.

But on top of this, public EV charging stations in Kentucky now have to pay an additional 3 cents per kilowatt hour of electricity distributed, and an additional 3 cents for those chargers that are on state property. This is similar to (but larger than) Iowa’s dumb EV charging tax, with both taxes applying to public charging and not home charging.

When compared to Kentucky’s average electricity rates of 13 cents per kilowatt-hour, this would represent a 23% or 46% tax on electricity – although, usually public charging is more expensive than that. At the Kentucky Public Service Commission’s approved rate of 25c/kWh, this represents a 12% or 24% tax.

These rates on public charging are notably higher than the roughly 11% tax that Kentucky collects on gasoline (28.7 cents, compared to a current average gas price of $2.78 per gallon in the state). If that tax were calculated on a per-kWh basis, it would be about 0.85 cents per kWh, meaning electricity is taxed at ~3.5x the rate of gas (or 7x on state property). And gas vehicles do not have to pay an additional registration fee due to their powertrain, despite the damage that it does to every Kentuckian.

Despite only applying to public charging, this new tax will affect commuters and apartment dwellers disproportionately. Apartment dwellers are more likely to charge on public charging, which means that these charging sessions will be taxed while homeowners’ charging sessions won’t, meaning a larger tax on renters than homeowners. It also means that places of business that previously incentivized workers or customers with free charging may no longer be able to offer these free charging services as a result of the tax.

But that’s not all! Kentucky also has a 6% tax on utility services across the state – though a person’s primary “place of domicile” is exempt from this tax. So it’s possible that an EV driver may need to pay three taxes depending on where the electricity is coming from.

The rationale for Kentucky’s new tax is similar to those in other states – Kentucky is laboring under the misguided notion, propagated by Koch/fossil fuel industry propaganda, that electric vehicles don’t pay for roads. This rationale can be seen in the way the legislation is crafted – the charging tax is automatically indexed to the price of road repairs, which is notably not true of the gas tax in the state of Kentucky (that is instead indexed to the price of gasoline, not to road repairs). Kentucky even calls the new annual tax a “road usage fee” in the legislation, even though it does not levy a similar fee on gas vehicles.

The fact is, the vehicles that are doing damage to roads also don’t pay for roads – gas taxes only cover less than a third of Kentucky’s road costs, which means that gas vehicles are freeloading on at least two thirds of the road budget for the state.

In actuality, virtually all road damage is done by diesel semi trucks anyway, not gas or electric cars, so road damage has little to do with passenger vehicles. An average EV does tens of thousands of times less damage to roads than a semi truck over the course of the year, so if a $120 fee is considered fair for an EV, then semi trucks should be paying registration fees in the millions of dollars – and if the latter sounds too high, then you must also acknowledge that the former is too high, if road damage is your main concern.

On top of this, gas taxes certainly don’t pay for the immense damage that burning gasoline causes, which cost society about $4 per gallon burned. The total cost of subsidies to dirty energy in America, a large portion of which goes to gasoline for motor vehicle use, was $760 billion in 2022. Few states even attempt to correct for this subsidy, with only a few having any sort of pollution pricing scheme.

Regardless of this free ride that fossil-powered vehicles are getting, in every state, on both our roads and our lungs, it didn’t stop Kentucky Governor Andy Beshear from trying to stop a pittance of a 2 cent gas tax rise, claiming that he wanted to save Kentuckians money. The same rationale has not been applied to stop these abusive EV taxes, despite that 3c/kWh + $120/year is a much bigger increase than 2c/gallon (one gallon of gas has 33.7 kWh of energy in it). And as covered above, that bigger increase will disproportionately hit renters.

But these taxes aren’t just bad because they unfairly disincentivize a superior transportation option, we also can’t even figure out a way that they help Kentucky.

As of last year, there are 7,560 total EVs registered in Kentucky, so that’s $907k dollars per year from the registration fee, plus some amount from the public charging fee. That means the registration fee is enough to pay for about 25 miles of road, out of about 78,000 total miles of road in the state. Not much of an impact, there.

Now, if this were another state, one might be able to make the argument that local industry was trying to make a protectionist move in order to help the oil or automotive manufacturing industries.

But Kentucky hails itself as “the premier location in the United States to manufacture electric vehicles,” and is the third-largest coal-producing state. Coal may (rightly) be dying off as an industry in the US, but coal is used for electricity generation, and can be used to charge EVs. It can’t be used to power gas cars – and Kentucky doesn’t produce much oil at all.

So this doesn’t make any sense for Kentucky’s main historical industry, coal, and disincentivizing EVs doesn’t make any sense for Kentucky manufacturing if the state is trying to position itself as a good place for EVs.

And of course, it doesn’t help Kentucky citizens with their health bills. Kentucky has a high asthma rate (ranking 10th worst) and low life expectancy (5th worst). We know that higher levels of air pollution are bad for people, and we know that higher amounts of electric cars make areas healthier. So Kentucky could gain a lot from incentivizing EVs, instead of overtaxing them.

So here we have yet another example of a state falling to fossil fuel propaganda and harming itself in the process, when the obvious solution remains unused – a mileage- and weight-based usage fee, plus pricing to correct for the amount of pollution that each vehicle foists on us all (gas and electric). Happy new year, Kentucky. Consider voting in a legislature that isn’t hostile to you next time.