The contentious $250 annual registration fee for electric vehicles—and $100 for hybrids—has been stripped from Senate Republicans’ budget proposal, released Monday by the Senate Finance Committee.

The House-passed version of the bill had included the annual tax, with GOP lawmakers arguing that EV and hybrid owners should help fund the Highway Trust Fund, which pays for road repairs.

But as Politico first reported, the Senate version drops the fee due to “logistical and procedural issues.” Republican Sen. Bernie Moreno said the idea was too burdensome to implement.

“It’s impossible. There is no mechanism today for the federal government to collect an annual fee. Doesn’t exist,” Moreno told Politico. “It would cost us more money to create a system to collect the money.”

Moreno had previously argued that EVs should be taxed more—$500 annually, and $250 for hybrids. But on Tuesday, he walked that back, saying there had been “a little miscommunication.” He now claims he was proposing a one-time fee at the time of purchase, not an annual tax.  

That said, this isn’t necessarily the end of the federal EV fee. Senate Republicans could still rework it into something that sounds more palatable.

Critics argue that a flat annual tax would actively discourage EV adoption. It would hit EV drivers harder than gas car owners and unfairly penalize those who drive fewer miles per year.

Photo by: Tesla

Worse, it would’ve applied retroactively, meaning people who already bought EVs would suddenly be on the hook; someone who has owned a Nissan Leaf for more than a decade, for example, would now face this new tax. As InsideEVs noted Monday, there’s no legal precedent for this kind of a post-purchase vehicle tax since the 18th century.

Consumer Reports called the proposed fee punitive, saying it would require major amendments to be equitable. The actual problem, they pointed out, is the stagnant federal gas tax—which hasn’t budged from 18.4 cents per gallon since 1993.

By some estimates, the proposed $250 EV fee would be more than double what gas car owners currently pay each year in gas taxes. And since many states already charge annual EV fees, tacking on a steep federal one would pile on the burden.

None of this means Senate Republicans are softening toward battery-powered vehicles. The new bill proposes eliminating the $7,500 federal tax credit for new EVs as well as the $4,000 used EV credit just 180 days after—and if—the bill becomes law. 

The so-called leasing loophole, which allowed buyers to claim credits regardless of the source of origin of the critical materials, would be eliminated immediately.

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