On Tuesday, April 29, Rep. Sam Graves (R-MO)—chair of the House Transportation and Infrastructure (T&I) Committee—released text of the proposed tax and budget bill. As part of the congressional Republican bill that disproportionately favors the ultrawealthy by extending the Trump tax cuts, the transportation section calls for a slate of new taxes on cars. The new federal car taxes would raise costs for the hundreds of millions of Americans who rely on driving in their day-to-day life and penalize low-emission technologies while falling far short of addressing serious gaps in infrastructure funding. The car taxes add to the slate of higher costs of living resulting from President Donald Trump’s tariffs and other elements of congressional Republicans’ budget bill that will likely raise costs for families on everyday necessities such as groceries, health care, electricity, and other basic needs. There are real solutions to fairly fund transportation infrastructure through fiscally responsible policies, but this new proposal to offset tax cuts for the wealthy is not one of them.
The House T&I proposal would establish three new federal taxes on all registered vehicles starting in different years: $200 on all-electric vehicles; $100 on hybrid vehicles; and $20 on all other passenger vehicles. (see Table 1) These recurring costs, to be collected every year the fees are in place, are inequitable from a consumer standpoint: $200 for electric vehicles is twice what the average gas burning vehicle contributes to the fund per year, and some efficient gas-powered technologies use less gasoline than hybrids but would face lower fees compared to hybrids.
User fees to maintain our roads do make sense, but raising taxes on a per-car basis in a haphazard manner unrelated to road usage or impacts on highway infrastructure is ineffective. Altogether, the car taxes would make up for only 34 percent of the shortfall in the Highway Trust Fund (HTF). The HTF, and more specifically its highway account, provides funding for federal-aid highway projects: the Interstate Highways System and most nonlocal roads. The HTF is funded, in part, by gasoline taxes—which are an approximate user fee—but have not been adjusted for inflation since 1993. This has contributed to the HTF running a shortfall since 2001. The House proposal does not resolve this challenge and, in fact, still results in an annual multibillion dollar shortfall and imposes a disproportionate impact on specific clean technologies, demonstrating a fealty to oil industry interests to sell more gasoline rather than a real effort to generate revenues fairly for transportation infrastructure. The T&I legislation also revokes funding for hundreds of local transportation projects that improve safety and the quality of life, undermining neighborhood transportation infrastructure.
Based on the most recent national vehicle registration data from 2023, here is a rough estimate of the annual revenue that the new car taxes could generate when they are all in effect.
Conclusion
The House Republican T&I Committee proposal would likely cost Americans on the order of $7 billion each year, while the broader bill would give an average tax cut of $278,000 to each taxpayer in the top 0.1 percent of earners over 10 years. Making the wealthy pay their fair share of taxes should be a higher priority over raising vehicle costs for ordinary Americans, but the congressional Republicans’ budget proposal does the opposite.