California is the top market for electric vehicles (EVs) in the U.S. This shift to electric cars is causing budget issues because the state depends on revenue from gasoline taxes to fix roads. To tackle this, lawmakers want to try a new mileage-based tax to make up for the lost money. They plan to test this idea in a trial starting in August 2024.
Maintaining California’s roads costs about $8.5 billion per year, with most of this money coming from taxes on gasoline. When people switch from gas to electric cars, California loses money. Even hybrids are contributing to this budget problem. In 2022, there were around 1.1 million electric cars and 1.3 million hybrids in California.
On average, Californians pay about $300 a year in state gas taxes, but EV owners only pay a $100 annual registration fee, leading to a loss of $200 million per year. This loss will increase as California plans to ban the sale of gasoline cars by 2035, cutting off gas tax revenues completely.
To address this, Caltrans is suggesting a new solution called the California Road Charge, which would tax drivers based on the number of miles they drive each year. The exact rate is not set yet, but there are three options: 2, 3, or 4 cents per mile. This system could actually save money for some drivers compared to the current gas tax. For instance, if you drive a 2023 Honda Pilot 1,000 miles per month, your monthly Road Charge bill would be $20, $30, or $40, depending on the rate.
Drivers could choose how their mileage is tracked, either by using an electronic device in their car, the car’s built-in tracking system, or by sending a picture of the odometer to Caltrans. Interested drivers can sign up for the pilot program on the California Road Charge website. Selected participants will pay the Road Charge from August 2024 to January 2025 and fill out two surveys. At the end, the state will refund their gas tax or EV registration fee. To encourage participation, Caltrans will give participants up to $400 in gift cards.
The data from this program will help lawmakers decide if the Road Charge should replace the gas tax in the future.