With the 2020 New Mexico legislative session coming up, senators and representatives are pre-filing bills for consideration. Two of these bills seek to tax electric vehicles and renewable energy.
Renewable Energy Tax
SB 18, filed by Sen. Michael Padilla, a Democrat representing the South Valley just below Albuquerque, seeks to add a 2.5% tax for the wholesale value of each megawatt-hour. While this initially seems like a way to discourage the adoption of renewable energy, the bill does exempt a variety of entities and home renewables. The following entities are exempted from the tax:
- the United States or any agency, department or instrumentality thereof
- the State of New Mexico or any political subdivision thereof
- any Indian nation, tribe or pueblo from activities or transactions occurring on its sovereign territory
- any foreign nation or agency, instrumentality or political subdivision thereof, but only when required by a treaty in force to which the United States is a party
Also exempted from the tax is any renewable energy made for self-use by any entity, including home generation like rooftop solar. Excess production beyond one’s personal use of up to 500 kWh per day is also exempted, even when sold back to the grid.
This basically only leaves utility-scale production subjected to the tax, and all income from this tax would go to a fund for early childhood programs in the state.
Hybrid & EV Registration Fee Increases
Another bill, SB 20, would add extra registration fees for electric and hybrid vehicles. The bill was introduced by Sen. Bill Tallman, a Democrat representing part of Northeast Albuquerque.
The bill proposes adding an extra $100 fee for all electric vehicles with a battery of at least 4 kWh and that can be recharged from plugging in, so this would appear to include most plugin-hybrid electric vehicles (PHEV). Hybrids not capable of being charged from plugging in would be subject to a smaller $50 fee.
All funds collected would go to the state road fund, presumably to make up for the decrease in collected gasoline taxes when vehicles use less or no gasoline.
While we don’t know the motivations behind this bill, we do know that many such bills are being filed around the country. In some cases, the fees are rather exorbitant and are clearly meant to discourage EV adoption. In other cases, a small fee is around the amount an equivalent gasoline vehicle would have paid into the roads via gasoline taxes, and may genuinely be designed to keep the roads in good order.
In this case, it appears to be pretty close to what an average vehicle would have paid into the road fund via gasoline taxes. New Mexico charges a $0.17 per gallon tax on gasoline, with most going into the road fund. A 25 MPG vehicle driving 12,000 miles would pay around $82 in such taxes.
While reasonable on the surface, it’s also worth noting that electric vehicle adoption in New Mexico is still very modest, and has probably not resulted in any readily measurable impact on the state’s road fund. Many argue that it would be better to wait until the tax is really needed for road upkeep in the state to help increase early EV adoption.