The number of electric vehicles registered in Minnesota has nearly tripled since 2017. In this photo, Tesla Model 3's are assembled in California.  Photo: Justin Kaneps, New York Times

Why do electric-vehicle owners pay a surcharge in Minnesota?

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When Sam Villella received the annual notice to renew his license tabs, he wondered why there was a $77.25 surcharge for his electric vehicle (EV), a 2018 Tesla Model 3.

Villella, an optometrist from Blaine, is the type of fellow who really studies such things. The bill explained part of the fee — a $2.25 “technology surcharge” — but there was nothing about the remaining $75 charged to motorists who own electric vehicles.

So he asked Curious Minnesota, the Star Tribune’s community-driven reporting project fueled by queries from readers, to answer the questions: Where does the electric-vehicle surcharge money go? And why isn’t the state more transparent about it on tab renewal bills?

“I cannot believe they don’t explain the fee, especially with the prevalence of these cars,” said Villella, a self-described “car guy” who owns two Teslas.

The number of electric vehicles registered in Minnesota has nearly tripled since 2017, reaching 12,511 last year. But these vehicles — powered entirely by electricity and different from gas/electric hybrids like the Toyota Prius — represent a tiny fraction of the more than 7 million cars and trucks registered in the state.

Minnesota law requires that EV surcharge revenue go into an enormous $2.3 billion transportation reserve called the the highway user tax distribution fund, which is fueled by gas, vehicle sales and registration taxes.

Because EV owners aren’t gas guzzlers, they don’t pay state and federal gas taxes that help maintain roads and bridges. Yet they still use the state’s crumbling road system.

Many states, including Minnesota, charge EV owners a flat fee to help cover the costs of transportation infrastructure. Some state lawmakers have tried to increase the EV fee — a proposal to hike it to $250 failed last year. And the Walz administration supports boosting the surcharge by $25 to pay for more EV charging stations.

A study by the nonpartisan Great Plains Institute found EV owners actually pay more in state taxes than drivers with gas-powered vehicles.

“Because the current cost of EVs is higher than traditional vehicles, EV owners pay more in motor vehicle sales taxes and registration fees,” said Great Plains Institute vice president Brendan Jordan. EV taxes are based on the retail price of the vehicle, and these cars can be pricey.

Some environmental advocates still question the fee. After all, EV owners are doing their bit to minimize harmful greenhouse gases.

But St. Paul EV market consultant Jukka Kukkonen thinks the $75 fee here is reasonable.

“People are concerned about the roads not being in good shape,” he said.
In terms of the bill itself, the Department of Public Safety said they’re not customized to explain fees to individual customers.

For the record, Villella went electric because he loves the efficiency and verve of his Tesla, though he questions the wisdom of the surcharge.

“Why would you put a fee on something you’re trying to encourage?” he said.

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