
Research: Alternative Revenue Mechanisms

The ability of the fuel tax to generate revenues is under pressure—more vehicles are using less fuel or none at all, and inflation is taking a bigger bite from what is collected. In response, many states are turning to alternative revenue mechanisms to help bridge the funding gap.
In a study published in 2023, TPEC researchers documented alternative revenue mechanisms in the US and abroad. One mechanism is a special registration fee for specific hybrid and EV models. Across the US, 33 states—including Minnesota—have adopted a special registration fee for electric and hybrid vehicles.
Another mechanism is the charge per mile, also known as a mileage-based user fee, distance-based user fee, and roadway user charge. As of 2023, three states have enacted legislation to collect revenues from per-mile charges. Other states—including Minnesota—have tested or demonstrated per-mile charges, while others have explored or researched this mechanism
In a study published in 2024, researchers explored why some states adopt EV fees and others don’t. They found several determinants—such as the reliance on the motor fuel tax, improved fuel efficiency, poor roadway conditions, higher EV sales, and more neighboring states with EV fees—make it more likely for states to adopt these fees. Conversely, other factors made it less likely for states to adopt EV fees, including a higher growth in vehicle miles traveled and the political environment.