California Testing Replacement For Gas Tax
States are increasingly seeking ways to recoup losses from declining gas tax revenues. One notable example is California, which is piloting a “road charge” system.
This system charges drivers based on the number of miles they drive rather than the amount of gas they purchase. The pilot program, initiated by the California State Transportation Agency (CalSTA), aims to find sustainable ways to fund roadway maintenance as gas tax revenues are projected to decrease.
According to CalSTA officials, a bill signed in 2021 established the pilot program to test alternative funding methods. The agency suggests that this system could even result in net savings for some motorists under certain circumstances. Participation in the program is voluntary, and participants can earn up to $400 in incentives for helping test the system. Drivers can report their mileage using manual odometer entries, an onboard plug-in device with or without GPS, or in-vehicle telematics without GPS.
California has been exploring alternative revenue sources since the enactment of Senate Bill 1077 in 2014, which emphasized the need to move away from the traditional gas tax structure. With a significant shift towards electric and fuel-efficient vehicles, the state faces challenges in sustaining its $2.5 trillion economy through gas taxes alone. In a 2017 summary, Caltrans highlighted that reduced reliance on gasoline and diesel vehicles would necessitate new funding mechanisms for infrastructure maintenance.
Phil Flynn, a senior market analyst at Price Futures Group and a FOX Business contributor, underscored the importance of gasoline taxes to federal and local economies. He noted that states will need to find alternative revenue sources as the push for electric vehicles (EVs) grows.
Under President Biden’s administration, which aims for 50% of all new vehicle sales to be electric by 2030, EV sales have surged, quadrupling since he took office. The Biden administration reported in January that over 4.5 million EVs are now on the road.
Despite the current low percentage of EVs, states are already feeling the impact of reduced gas tax revenues. California, with the highest number of registered vehicles, is particularly affected. Flynn pointed out that the state’s budget surplus has diminished partly due to the transition away from gas-powered vehicles. He argued that replacing the oil and gas industry with an industry dependent on subsidies necessitates finding new tax revenue sources.
While Flynn is not opposed to a per-mile charge, he expressed concerns about privacy issues related to GPS tracking. However, the California State Transportation Agency assured that security protocols are in place to protect personal information. Participants choose their preferred reporting method, and no one is tracked individually. GPS data is anonymized, and personal information collected during the pilot will be destroyed 30 days after the program concludes.
Currently, there is no proposal to implement the road charge system statewide. The program would require extensive public engagement and statutory authority, which are not being pursued at this time. The pilot program aims to gather feedback and data to assess the feasibility of this alternative funding method, ensuring that California can maintain its infrastructure amidst changing vehicle trends.