Over the past decade, with the gradual increase in fuel tax rates, California’s fuel tax revenue has been steadily increasing. However, as the government promotes zero-emission vehicle policies, more and more people are purchasing electric cars. It is expected that the total fuel tax revenue in the state will decrease by $2 billion annually over the next decade. A California legislator has proposed to make up for this by implementing a mileage-based revenue system.
The proposal AB1421 suggests implementing a Road Usage Charge (RUC) based on driving mileage, regardless of whether it is a gasoline car, an autonomous vehicle, or a hybrid electric vehicle. This measure aims to offset the declining revenue from fuel taxes.
Initiated by California’s 11th District State Assembly Member Lori D Wilson, the proposal named “Vehicles: Road Usage Charge Technical Advisory Committee” has been submitted to the State Assembly Transportation Committee. Wilson stated that one of the benefits of charging a road fee is to reduce the burden of fuel consumption tax on low-income groups.
According to the proposal, California’s transportation funding mainly comes from six different fuel taxes (including gasoline and diesel) and special vehicle fees. These fees generated approximately $14 billion in state revenue in the 2023-2024 fiscal year, with gasoline excise tax accounting for the highest revenue at around $7.8 billion.
Californians pay $1.6 more than the national average per gallon of gasoline, with a significant portion of this cost attributed to fuel taxes. The fuel consumption tax rates for gasoline and diesel have been increasing annually since 2017, with the gasoline consumption tax rising from 30 cents to 57.9 cents per gallon by July 2024.
However, since California began promoting the use of zero-emission electric vehicles, the total tax revenue from gasoline and diesel has been decreasing. Governor Newsom has set the goal for California to achieve 100% zero-emission vehicle sales for cars and light-duty trucks by January 1, 2035, and for all vehicle types by 2045, significantly reducing fuel tax revenue.
According to the California Energy Commission, Californians have purchased over a million electric vehicles in the past four years, with the total number of electric vehicles expected to continue growing by 2035, potentially leading to a $31.3 billion decrease in fuel consumption tax revenue over the next decade.
The Legislative Analyst’s Office (LAO) predicts that fuel tax revenue will decrease by $2 billion annually by 2030, further dropping to $4 billion by 2035. Research from the Mineta Transportation Institute estimates that by 2040, California’s fuel tax revenue could decrease by $4.8 billion to $12.1 billion.
In 2014, the legislature passed SB1044, the “Vehicles: Road Usage Charge Pilot Program,” establishing the Road Usage Charge Technical Advisory Committee to evaluate the implementation of mileage-based road fees in California.
The legislation states that gasoline taxes cannot meet California’s long-term revenue needs because of improving fuel efficiency and emerging alternative fuels, leading to a reduction in gasoline tax revenue. By 2030, half of the revenue is expected to be used to improve fuel efficiency (at the time of the legislation, California didn’t mandate the replacement of gasoline cars with electric cars) and to bundle road and highway costs into gasoline taxes, making it challenging for users to understand what they are paying for in terms of road and highway usage fees.
California’s fuel tax revenue is expected to face a significant reduction, prompting the proposal to increase road fees as a replacement for fuel consumption taxes. Assembly Member Wilson stated in the new proposal that California completed its largest-ever road fee research in 2017, recruiting over 5,000 cars that traveled over 37 million miles in nine months.
Under SB1044, drivers will pay a road usage fee based on mileage driven, with a uniform charge for each mile regardless of the road segment. Experiences from other states indicate that mileage-based charges can ensure data security, protect driver privacy, and serve as an alternative to fuel consumption taxes.
According to CBS News, State Assembly Member Carl DeMaio from the 75th District criticized the proposal, stating, “Let’s be clear: mileage-based taxation in California is about money-grabbing. This is regressive, unfair.” He estimated that Californians could pay $900 to $1,200 annually on average, disproportionately affecting commuting households with longer travel times and low-income families.
DeMaio also questioned the idea of using road usage taxes to replace existing gasoline taxes, stating, “It’s nonsense; they won’t give up revenue but introduce another tax.” Mr. Wang, a resident, expressed that California’s taxes are already high and opposes the government’s collection of additional taxes under various pretexts.
It is expected that the California Department of Transportation will announce the results of the experimental project later this year, which includes a fixed charge of 2.8 cents per mile and personalized charges based on vehicle fuel efficiency. The pilot program has also reported on different methods of measuring mileage for reporting to the government, such as odometer counting and designated mileage tracking devices. ◇