News Every Day | 27 March 2025, 05:05

Your Mileage May Vary on New Tax Proposal

SACRAMENTO, Calif. — In a normal state run by politicians who weren’t constantly trying to hose taxpayers to fund an ever-expanding list of dubious programs, it wouldn’t be particularly hard to solve a minor tax inequity problem. California’s roads and freeways are funded largely by the gas tax, but tax revenues are declining as more drivers purchase non-gas-powered vehicles. One out of every four new cars sold in the state is an electric vehicle — and they’ve largely become free riders on the road system.

“The state is exploring implementing a California Road Charge, which would replace the gas tax with a mileage-based user fee for drivers who use the roads,” reported ABC 30. “Essentially, charging by the mile instead of the tank.” The California Department of Transportation explains that “as cars get more fuel efficient or use other energy sources, the gas tax will no longer fund the infrastructure California needs.” Needless to say, California’s road infrastructure already is among the most poorly maintained and inadequate in the nation.

That California Road Charge refers to a 2017 pilot program to evaluate this alternative funding system, but that was a simulation. The state passed a 2024 pilot, under which actual drivers would pay actual fees based on their actual mileage — and would then receive a rebate for their fuel charges. It makes perfect sense to test a program before implementing it statewide. Caltrans argues — correctly, I believe — that mileage charges are more equitable for drivers.

I once heard the current road user fee or gas tax compared to paying a general fee for groceries, but then being free to go to a store and haul off as many groceries at any time as one chooses. Essentially, drivers can drive as much as they want on the roads, streets, and freeways and simply pay for that service based on whatever taxes they pay at the pump (and in their other tax bills, as some property taxes pay for local road projects).

Charging by use is a time-tested free-market principle. As drivers purchase hybrids that use little gasoline or EVs that use none of it, there’s a greater disconnect between driving and costs. California does impose a $125 fee on EVs at registration and a $100 fee for plug-in hybrids, but the typical gas-dependent driver spends $300 in gas taxes each year. With California trying to phase out the sale of new internal-combustion vehicles by 2035, this mileage fee idea was bound to emerge.

“If users’ costs don’t change based on how much they use the system, they have no reason not to overconsume it. Misconceptions about ‘free’ roads are a classic example of this and congestion, pollution and lost time are the costs paid,” wrote Adrian Moore, vice president of the libertarian Reason Foundation. Furthermore, he notes that such mileage-based road fees are being implemented throughout the world and in other states. Some mileage taxes also factor in the weight of the vehicles given that heavier vehicles cause more wear and tear.

For instance, the Utah Department of Transportation allows EV drivers to “choose to continue to pay the flat fee for alternative fuel vehicles or enroll in Utah’s Road Usage Charge program to pay for road usage based on the number of miles they drive, up to the amount of the set flat fee.” That seems like a fairly sensible way to enable drivers who don’t use gasoline to pay for the roads.

One big question around mileage taxes is the monitoring of the mileage. With most systems, drivers can use a GPS to track their mileage, which can seem a bit creepy. Or they can take a photo of their odometer. Given the degree to which everything we do is tracked anyway, this approach doesn’t seem overly intrusive beyond what’s become normal. California’s insurance initiative, Proposition 103, has since 1988 allowed insurers to base their premiums in part on our mileage, although insurers mostly rely on self-reporting of driving data.

The mileage-tax conundrum centers on trust. Californians have little reason to trust that any mileage charge won’t be imposed on top of the existing gas tax. “California’s greedy politicians have already imposed the highest GAS TAX and CAR TAX in the nation on drivers, and now they want to impose a new MILEAGE TAX to charge us PER MILE we drive to get more of our money!” said Republican Assembly member Carl DeMaio of San Diego on the Reform California website.

That might be political rhetoric, but Californians have reason to fear the mileage tax could become another tax on driving — especially given the state’s embrace of urbanist policies that try to coerce us to use transit systems. California gets a poor bang for the buck for its current road spending. It often promises to improve infrastructure when it raises road taxes, but then uses a large share of the revenue on environmental projects, bike lanes, and road diets, which increase congestion to discourage car use.

So the state has a legitimate need to ensure the sustainability of road funding as an increasing number of drivers buy EVs, but it’s unlikely that Californians can trust lawmakers to create a fair and revenue-neutral solution.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

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