Hawaii Just Enacted an Electric Vehicle Road Usage Surcharge. The Contiguous States Should Be Next.

For years, policymakers have sold electric vehicles (EVs) as a keystone solution in the battle to combat climate change. EV sales have surged globally—today, one in every four vehicles sold worldwide is electric. Yet, while EVs are helping cut tailpipe emissions substantially, they are quietly eroding a key pillar of transportation finance: the gas tax. Numerous states fund their roads with these fuel taxes, but revenues from these funds dry up when drivers stop filling up at the pump. 

Hawaii has chosen to face that reality. Until now, the state charged EV owners a flat $50 registration fee, but that policy no longer made sense as EV adoption accelerated. On July 1, 2025, Hawaii implemented a new system that gives EV drivers a choice: pay a flat $50 annual surcharge or a mileage-based user fee (MBUF) of $8 per 1,000 miles, capped at $50.

Driving imposes costs far beyond gas, from road maintenance to congestion to environmental damage. Economists call these additional impacts “negative externalities,” which are particularly high for any motor vehicle. Economists have long argued that mileage fees better capture those externalities than blunt fuel taxes. Hawaii’s system is fairer, more reflective of actual use, and will generate millions in revenue that the state sorely needs as fuel tax collections stagnate.

Other countries and cities have implemented additional driving costs to great success. New York City’s congestion pricing, launched earlier this year, cut traffic into Manhattan by 12% and raised $48.6 million in just its first month. Internationally, Stockholm, Sweden’s congestion charge, introduced in 2006, slashed traffic by 20%, and Milan, Italy’s Area C scheme reduced congestion and emissions across the city center. These examples consistently show that smarter fees change behavior and stabilize funding.

Meanwhile, fuel taxes are becoming ever more regressive. A driver of a fuel-efficient hybrid can travel hundreds of miles while paying the same tax as a neighbor with an old gas guzzler. That system punishes those who can least afford it (gas-guzzling cars often come with cheaper retail prices), while doing nothing to account for road wear and congestion. Mileage-based charges are a more honest and fairer way to price driving by reflecting total distance driven rather than gas purchased. We shouldn’t just stop at MBUFs, though. Charging drivers based on miles driven is more correlated with usage than any broad fuel tax or sales tax. Real-time road usage charges are the future. Electric vehicles have often been seen as a “sacred cow” in liberal politics, where policymakers promote their benefits endlessly while neglecting to mention they carry the same negative externalities as gas-powered cars. 

Some states have moved the needle but still apply broad, general policies. Cordon pricing in New York City has been effective at more accurately reflecting the cost of any vehicle, electric or non-electric, driving into the most congested parts of Manhattan, but it does not truly reflect real-time congestion levels nor specific street usage. In many parts of the country, economists now strongly desire “managed lanes”, where the fee to use one specific lane on a freeway is tied directly to real-time usage. The transportation industry has largely shifted to a willingness-to-pay approach, with dynamic pricing on most intercity services, including air travel, rail travel, and rideshare. Solo driving has been one sector reluctant to switch, with fuel taxes benchmarked by the price of oil rather than the true demand for gasoline. As such, pricing driving in alignment with other forms of transportation will help to establish a more sound market-based approach to motor vehicle transportation and shift demand closer to the provided supply. Hawaii’s initial inertia in catalyzing that switch is critical—with more states following the lead, the switch to more equitably priced road usage will be far easier. 

Hawaii has broken the seal, and other states are following suit. Oregon is considering a similar system. Minnesota already charges EVs an annual surcharge. 39 states now impose some kind of EV fee, but most states have designed them poorly by solely using flat, regressive fees that burden infrequent driving. It’s time to follow Hawaii’s lead and move the fee specifically to miles driven.

The transition to electric vehicles is undoubtedly a climate victory and much-needed, but unless the rest of the country adopts smarter road usage fees, we risk underfunding the very infrastructure those vehicles depend on. Hawaii has shown there’s a better path. The rest of the contiguous US should follow.

Photo Credit

SounderBruce, CC 2.0, via Flickr