Oregon's EV Mileage Tax Could Reshape the Future of Road Funding

Oregon is attempting to address a $300 million shortfall in its transportation budget by proposing a mandatory pay-per-mile fee for electric vehicle (EV) owners, a move that could make it the second U.S. state to implement such a policy after Hawaii. The initiative is part of a special legislative session called by Democratic Governor Tina Kotek to resolve a fiscal crisis that has already led to the suspension of nearly 500 job terminations and plans to close road maintenance stations. The state’s transportation department attributes the budget hole to inflation, declining gas tax revenue, and spending constraints.

Under Kotek’s proposal, EV drivers would pay a usage charge equivalent to 5% of Oregon’s gas tax. This would phase in starting in 2027 for certain EVs and expand to hybrids by 2028. Drivers would either pay approximately 2.3 cents per mile or choose an annual flat fee of $340. The program also includes a 6-cent increase in the state’s gas tax, raising it to 46 cents per gallon. EV drivers enrolled in the program would no longer pay supplemental registration fees. The state has a decade-old voluntary road usage charge program, which has been used to test various methods of mileage reporting, including smartphone apps and vehicle telematics.

Privacy concerns remain a significant challenge. Past surveys conducted by the state’s transportation department highlight that residents worry about GPS tracking and data security. Oregon’s voluntary program addresses these concerns by deleting mileage data 30 days after payment. However, the use of plug-in GPS devices is being phased out due to higher costs and the risk of removal. Critics, including representatives from nonprofits like Climate Solutions, argue that mandatory road usage charges could act as a disincentive for EV adoption, particularly if they are seen as a penalty rather than a fair contribution.

Hawaii, which launched a similar program in 2023, offers an optional payment of $8 per 1,000 miles driven, capped at $50, or a flat annual fee of $50. By 2028, Hawaii will require all EV drivers to enroll in the program, with odometer readings taken during annual inspections. The state plans to expand the program to all light-duty vehicles by 2033. Oregon’s approach, while distinct, mirrors Hawaii’s recognition that traditional fuel tax revenue is declining due to the increasing prevalence of electric and fuel-efficient vehicles.

Political tensions complicate the implementation of the program. Republican lawmakers have criticized the transportation department for what they perceive as mismanagement, while supporters argue the proposal is a necessary step toward long-term infrastructure funding. Experts like Liz Farmer of The Pew Charitable Trusts note that such a policy represents a “pretty major change” for most drivers and carries the challenge of public acceptance. Oregon’s experience with a voluntary program provides valuable insights into both the feasibility and the public response to mileage-based fees.

The broader implications of Oregon’s proposal extend beyond its borders. As more states face similar revenue challenges, the success or failure of this initiative could influence future policy design. Arizona, for instance, will hold a vote in 2024 on whether to ban mileage-based fees altogether. Meanwhile, federal incentives for EV purchases are set to expire, adding urgency to finding sustainable state-level funding solutions. Oregon’s decision could serve as a case study for others navigating the same transition in the era of electrification.

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