One of the benefits of buying an EV is saving money by ditching trips to the gas pump in favor of a plug either at home (usually affordable) or at a public charging station (at times less affordable). There’s also the added benefit of being better for the environment—well, depending on who you ask—or at least appearing to be. However, EV owners saving money might good for them, but it’s less good for state governments, which lose out on some tax revenue from those citizens driving electric cars. We’re talking, of course, about the gas tax, which is levied on fuel purchases but not charging, and revenue from which is supposed to go toward road maintenance.
California is no different: a gas tax is added on every time someone fills up at the pump. However, with more Californians switching to EVs—the adoption rate there is higher than anyplace else in the country—and ditching dinosaur juice, those tax revenues are allegedly “dwindling” according to an ABC 7 news report.
To combat the reduced gas tax revenue without singling out EV owners or trying to approximate an electric car’s equivalent gas use or some other scheme that, it’s assumed, nearly everyone (owners of gas cars and EVs alike) might find unfair, the California Department of Transportation (known as Caltrans) is considering ditching the gas tax all together in exchange for imposing a use tax on all vehicles, which would charged per mile driven, regardless of what powers your car. To test it out, Caltrans has launched a pilot program called “California Road Charge.”
How will the state keep track of how many miles you drive? Well, those who are volunteering to participate in the Road Charge pilot program can elect to have a tracking device installed in their car. Alternatively, participants can also just take a picture of their odometer and submit that instead.
By now you’re probably wondering just how much cash is at stake if Caltrans is willing to explore a program like this? According to Caltrans spokesperson Lauren Prehoda, the state could be looking at a major loss.
“On average, Californians pay about $300 a year in state gas taxes,” said Prehoda. “EVs have a $100 [annual] registration fee… that’s a $200 million a year loss.” Sure, $200 million a year is a lot of money, though when zooming out a bit more, that may not be as high as it sounds, relatively speaking.
Caltrans says that currently there are 1.2 million electric or hybrid vehicles registered in the state. According to the DMV there were over 35 million registered vehicles in California in 2023. So, while California is losing roughly $200 million a year from EVs, they’re still making that $300 or so in gas tax revenue per car from 33.8 million internal combustion vehicles. That’s technically still enough to cover the $8 billion to $9 billion a year Caltrans says it spends on road maintenance in California, but the margin left over isn’t much. We can see why Caltrans is exploring options.
Obviously, the number of EVs owned in California is going to steadily rise, especially as we get closer to the state’s ban on new ICE vehicle sales. Part of EVs’ appeal, again, is avoiding gas prices altogether (into which the gas tax is blended), and charging from home, where you’d think or expect the tax man isn’t following your every move like they might at, say, a state-regulated gas pump. Which is why a per mile tax might make financial sense for the state, but it is going to be more than a tough sell to California lawmakers leery of angering voters who are already among the most taxed in the country.
There may also be other solutions. For example, Texas decided to hit EV owners with a $200 annual registration fee ($400 at time of purchase, since Texas offers two-year registration on new vehicles) to offset lost gas tax revenue, though that figure, alleged to equate an EV’s average annual use with that of a normal vehicle’s gas consumption, has been deemed excessive and seemingly punitive by some third parties. (Can you guess what industry is powerful in Texas and lobbies actively? Did you answer fossil fuel?) EV owners in California likely wouldn’t be happy with something like that, but if the alternative is everyone having the state track their miles—in essence, surveilling their car use—maybe the EV fee would be an easier pill to swallow for voters—again, most of whom don’t drive EVs.
In the meantime, the California Road Charger pilot program is offering up to $400 in incentives for anyone who wants to test the system out and have their miles tracked by Caltrans.
