Scrambling to fill a state budget shortfall, the Oklahoma Legislature passed a $100 annual fee on all-electric vehicles and a $30 fee on hybrid vehicles early in 2017, only to have the measure struck down by the Oklahoma Supreme Court as unconstitutional late in the year.
The state Supreme Court ruled the fees violated the state constitution’s requirement tax increases pass by a supermajority in both houses of the state legislature. Oklahoma’s 75 percent supermajority requirement is the highest of any state.
The October 24, 2017 ruling was delivered in a case involving lawsuits by the Oklahoma chapter of the Sierra Club and Republican gubernatorial candidate Gary Richardson, who had sued to block the fee, arguing it was unconstitutional.
The legislature tried to skirt the constitutional requirements by calling the tax a fee, but because the principal purpose of the levy was to raise revenue, the court said it was in fact a tax.
Earlier in 2017, the legislature passed a $1.50 per pack “smoking cessation fee” on cigarettes, which the state’s Supreme Court struck down as unconstitutional. Subsequently, during a special session, the legislature passed the electric vehicle fee the court has now also struck down.
Funds for Infrastructure Spending
Revenue from the Oklahoma electric/hybrid fees would have gone to the State Highway Construction and Maintenance Fund.
States across the country are imposing fees on electric and hybrid vehicles to compensate for the loss of motor fuel tax revenues resulting from the increasing sale of fuel-efficient vehicles. Fuel taxes are meant to be used to build and maintain roads. Fee advocates note electric vehicles impose wear and tear on roads just as gasoline- and diesel-powered vehicles do, yet because they don’t use those taxed fuels, or in the case of hybrid vehicles use substantially less, their drivers are not paying their fair share of maintaining roads, the taxes’ advocates say.
Nationwide, at least 12 other states impose fees, ranging from $50 to $200, on electric vehicles. Because electric vehicles make up only 0.3 percent of vehicle sales in Oklahoma, the state estimated the electric/hybrid fee would have raised only an additional $420,000 for road maintenance in the 2019 fiscal year and $1 million in 2020.
Spending, Not Revenue Problem
Jonathan Small, president of the Oklahoma Council of Public Affairs, says the fact Oklahoma has had record state revenues in recent years shows the legislature’s budget priorities are misplaced.
“There is an incorrect focus on revenues rather than spending,” said Small. “Oklahoma doesn’t have a revenue problem; it has a spending problem.
“There are more than enough funds available at the local level to pay for roads in Oklahoma,” Small said. “Counties have hundreds of millions of dollars in surplus funds for roads.”
Byron Schlomach, director of the 1889 Institute, says Oklahoma’s governor should have addressed the issue sooner and in a way that didn’t focus only on raising revenues.
“It’s a shame the legislature and governor couldn’t unite in a more timely manner to address the issue of making hybrid and electric car owners pay their fair share of road maintenance and construction costs,” Schlomach said. “It’s also a shame that this was only addressed in the context of raising revenues to fund more government than Oklahomans really want.”
Joe Barnett ([email protected]) is a program development consultant for the Beacon Hill Institute.
Joe Barnett is a senior editor at The Heartland Institute and a policy advisor on budget and tax issues.
