KNOXVILLE, Tenn. — Each year, drivers in Tennessee will spend an average of $274 on gas taxes. For each driver, it varies by how much they are on the roads and how much they spend at the pumps.
The gas tax generated about $1.2 billion annually for the state of Tennessee. That money goes toward Tennessee Department of Transportation projects such as road repairs, bridgework and even pothole filling. It is one of the primary sources of funding for TDOT.
But, TDOT is facing a problem. More drivers are going electric and so fewer people are paying taxes at the pump, and fewer dollars are generated for the agency.
"What we found through research with the University of Tennessee, is that the average combustion engine vehicle pays $274 per year in their gas tax that they contribute," said Butch Eley, the TDOT Commissioner.
The gas tax in Tennessee is about $0.27 per gallon. It's one of the main sources of revenue for TDOT. But, with more electric vehicles hitting the road and rising costs for road work, the money generated by the gas tax isn't going as far as it used to, Eley said.
"What we recognize is that our current system of charging people for how we fund our road system is unsustainable because when you think about it, we all know that we're moving more and more toward electric vehicles," he said.
Instead of relying on the pump — electric vehicles rely on charging stations. In most cases, they cost less than fuel and don't have a state tax added in.
"We're going to have less and less money generated from the gas tax," Eley said.
Through the Tennessee Transportation Modernization Act, TDOT was granted the ability to start charging electric vehicles in a new way.
According to research by the EPA and TDOT, there is an expectation of exponential growth in the electric vehicle and hybrid sector, with possibly upwards of 200,000 electric vehicles in Tennessee by 2028.
"What this legislation did is allow us to be able to make that transition so that our electric vehicles are moving from now $100 per year, up to $274 per year, over a period of time over four years," Eley said.
The first round of increases will be seen when electric vehicle drivers go to renew their tags in 2024. The legislation raises the cost to register and renew tags for electric vehicles from $100 to $200 from 2024 to 2025. Then, it increases them to $274 by 2026.
In addition, TDOT said they can reserve the right to raise or lower the registration cost by 3% each year.
"I think that's our challenge that we have before us. And I think that's what the Modernization Act allows us to do for future generations," Eley said.