California May Replace Gas Tax with Per-Mile Fee

California May Replace Gas Tax with Per-Mile Fee
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One of the major perks of owning an electric vehicle (EV) is the cost savings from avoiding gas stations, opting instead for home charging, which is typically cheaper, or public charging stations, which can vary in cost. Additionally, EVs are often touted as being more environmentally friendly, though opinions on this can differ. However, while EV owners enjoy financial benefits, state governments are facing a challenge: a decrease in gas tax revenue, which is traditionally used for road maintenance.

California exemplifies this issue. The state imposes a gas tax on every gallon of fuel purchased, but as more residents switch to EVs, these tax revenues are reportedly dwindling. With California leading the nation in EV adoption, the impact on gas tax revenue is significant.

In response, the California Department of Transportation (Caltrans) is considering replacing the gas tax with a usage-based tax that would apply to all vehicles, regardless of fuel type. This proposed tax would be based on miles driven, aiming to create a fairer system as the state transitions to greener transportation options. To explore this idea, Caltrans has initiated a pilot program called “California Road Charge.”

Participants in the Road Charge pilot can choose to have a tracking device installed in their vehicles or manually report their odometer readings. The goal is to accurately measure the miles driven and determine the feasibility of a per-mile tax.

So, what financial stakes are involved? According to Caltrans spokesperson Lauren Prehoda, Californians pay an average of $300 annually in state gas taxes. In contrast, EV owners only pay a $100 annual registration fee, leading to a substantial revenue shortfall. Prehoda noted, “EVs have a $100 [annual] registration fee… that’s a $200 million a year loss.” Although $200 million is a significant figure, it is relatively small compared to the total gas tax revenue from the state’s 35 million registered vehicles, of which only 1.2 million are electric or hybrid.

California May Replace Gas Tax with Per-Mile Fee

Despite the current shortfall, the gas tax from the remaining internal combustion vehicles is still sufficient to cover Caltrans’ annual road maintenance budget of $8-9 billion. However, as the number of EVs increases, the revenue gap is expected to widen, prompting the need for alternative funding solutions.

One potential solution is a per-mile tax, which would ensure all vehicle owners contribute to road maintenance costs. However, this proposal might face resistance from California lawmakers and voters, who are already heavily taxed.

Other states are also exploring different approaches. Texas, for instance, imposes a $200 annual registration fee on EV owners to compensate for lost gas tax revenue. This fee has been criticized as excessive and punitive, especially given the state’s strong fossil fuel industry influence.

In California, the Road Charge pilot program offers up to $400 in incentives for volunteers willing to have their miles tracked by Caltrans. While this initiative aims to gather data and test the new system, it highlights the ongoing challenge of balancing revenue generation with the growing popularity of electric vehicles.

As the state moves closer to banning new internal combustion engine vehicle sales, finding a sustainable and fair funding model for road maintenance will be crucial. The per-mile tax might be a viable option, but it will require careful consideration and acceptance from both policymakers and the public.