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Proposed Luxury Tax on Expensive Gas Cars Would Pay for Electric Vehicle Infrastructure

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A new tax on gasoline-powered cars priced more than $60,000 would be used to fund electric vehicle infrastructure across the state.

The proposed measure, HB 1142, would apply a 1 percent general excise tax surcharge on cars with a manufacturer's suggested retail price, or MSRP, of more than $60,000. The collected funds would go int a Public Utilities Commission special fund for electric vehicle charging stations.

The bill was heard at the House Committee on Consumer Protection and Commerce Tuesday.

Those opposing the bill included car dealers, which argue that family vehicles and work trucks would be subject to the additional tax.

Brad Nicolai, president and CEO of JN Automotive Group, noted the negative effects of a national luxury tax from the 1990s.

"If we just referenced what happened in 1991, when there was a luxury tax of 10 percent that was imposed on vehicles that were over $30,000, it had a negative impact over two years in which nationally our industry declined over 23 percent," Nicolai said. "What that means is we're coming out of a pandemic. In March of this year, we had to lay off 50 percent of our employees. Now you're making it more difficult by adding additional costs that will impact our entire industry. That will translate into jobs actually lost."

Supporters of the bill said one of the main complaints about EV adoption is Hawaii's lack of charging stations.

Jeff Mikulina, executive director of Blue Planet Foundation, said the tax will not affect most car purchases.

"So what are we talking about in the $50,000 and above range? We're talking about Maserati, we're talking about high end Mercedes, vehicles like that," Mikulina said. "If you go to the web page of Servco, for example, and you look at the most popular pickup truck in Hawaii, the Toyota Tacoma, they have over 40 models available. Not one of those vehicles is over $50,000, so this won't apply to them for the MSRP. But for the high-end luxury cars, yes, you would pay a small fee and that money would then be used to refund folks who are getting electric vehicle charging stations, particularly those in multi-family homes and workplace charging."

Committee Chair Rep. Aaron Ling Johanson recommended the price threshold increase from $50,000 to $60,000. The committee recommended the measure be passed with amendments.

Four committee members voted to pass the bill out of committee with reservations. Rep. Sharon Har noted that all vehicles that cost more than $60,000, including Tesla EVs, should be subject to the tax. Rep. Sam Kong was the sole committee member voting no.

If passed, the tax would go into effect July 1 and sunset in 2030.

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