The Problem: Declining Gas Tax Revenue
California, home to the largest electric vehicle (EV) market in the country, faces a financial dilemma. The state’s road maintenance budget, heavily reliant on gasoline tax revenue, is at risk as more drivers switch to EVs. To address this issue, lawmakers propose a mileage-based tax. A pilot program to test this system will begin in August 2024.
Financial Impact of EV Adoption
According to Lauren Prehoda, a spokesperson for Caltrans, maintaining California’s road network costs around $8.5 billion annually. This money predominantly comes from the gasoline tax. However, as EV and hybrid vehicle adoption rises, gasoline tax revenues decline. In 2022, California had approximately 1.1 million electric cars and 1.3 million hybrids on its roads. “On average, Californians pay about $300 a year in state gas taxes. EVs have a $100 [annual] registration fee. That’s a $200-million-a-year loss,” Prehoda explained. With the state planning to ban gasoline-powered car sales by 2035, this revenue source will eventually disappear entirely.
To compensate for the dwindling gasoline tax revenue, Caltrans is proposing the California Road Charge. This system would tax drivers based on the miles they drive each year. Although the exact rate isn’t finalized, the program’s website suggests three possible rates: $0.02, $0.03, and $0.04 per mile. The website also indicates that some drivers could save money. For instance, a driver of a 2023 Honda Pilot who drives 1,000 miles per month would pay between $20 and $40 monthly under the Road Charge, compared to the current $27.57 in monthly fuel taxes. Conversely, EV drivers, who currently pay no gas tax, would incur new costs.
Tracking Mileage
Drivers will have multiple options to report their mileage under the Road Charge system. These include using an electronic device connected to their car, the car’s built-in tracking system, or submitting a monthly photo of their odometer. “Everyone has different levels of comfort when managing our data between efficiency and privacy, and that’s why it’s really important to have options from low tech to high tech,” Prehoda told ABC7.
Pilot Program Details
Drivers interested in the pilot program can sign up on the California Road Charge website. State officials will select participants in July 2024. These participants will make monthly Road Charge payments from August 2024 to January 2025 and will complete two surveys about their experience. The state will refund participants’ gasoline taxes or EV registration fees at the program’s end. To incentivize participation, Caltrans will offer up to $400 in gift cards.
The pilot program will collect data to help lawmakers decide whether to implement the Road Charge permanently. The idea of a Vehicle Miles Traveled (VMT) tax has been debated for years, but privacy concerns about tracking driving habits have hindered its acceptance.
Privacy Concerns
For the pilot, only the total miles driven will be tracked, without considering location or time. This approach aims to ease the public into the concept of mileage tracking. However, a fully implemented VMT tax might include congestion pricing, cordon pricing, and different rates based on the type of road.
To make the VMT tax equitable, there is discussion of adjusting rates based on income, offering lower rates for low-income drivers. However, this would require the state to collect additional personal information, raising further privacy concerns.
The Rationale Behind the Tax
The primary reason for transitioning to a mileage-based tax is to ensure that all drivers, including EV owners, contribute fairly to road maintenance. A simpler alternative could be increasing the EV registration fee, but this might slow down EV adoption.
Previous Pilot Success
California has conducted similar pilot programs before, which officials claim were successful. This pilot aims to replicate those results, expecting high approval from participants who self-select to join.
Incentives and Participation
Participants will track their miles from August 2024 through January 2025, earning up to $400 in gift cards for completing the program and surveys. Gasoline car drivers will receive a credit for gas taxes paid. The specific VMT tax rate is still under consideration, with potential rates between one and three cents per mile.
