California Asks: Should You Pay Per Mile You Drive? New Pilot Program Targets Road Funding As EV Boom Shrinks Gas Tax Revenue

California, a frontrunner in the electric vehicle revolution, is facing a hurdle. The gas tax, the lifeblood of the Golden State’s road maintenance budget, is shrinking as more drivers shift to EVs. Lawmakers are looking ahead, proposing a novel solution: taxing drivers based on the miles they drive.

A Pay-Per-Mile Approach

The pilot program, dubbed California Road Charge, kicks off this August.  Enrollment closes in June, with selections being announced the following month. The program runs through January of next year.

Here’s How It Works:

• Drivers pay a per-mile rate (either 2 cents, 3 cents, or 4 cents) based on the distance they travel. These values are hypothetical and are yet to be set by the California legislature.
• Monthly charges are settled online.
• Participants might be eligible for credit at the program’s end, potentially offsetting gas taxes paid or their EV registration fee.
• Mileage tracking can be done through an electronic device plugged into the vehicle, the car’s built-in system, or simply by submitting odometer readings. 
• Caltrans is sweetening the deal by offering rewards of up to $400 for participating.

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Leveling the Playing Field:

California currently relies on gas taxes, with the average driver paying roughly $300 annually. However, EVs are exempt from this tax, creating a funding gap. While they do pay a $100 annual registration fee, it falls short of the revenue generated by gas taxes.

According to Caltrans, maintaining California’s roadways costs a staggering $8 billion to $9 billion every year, with the lion’s share coming from gas tax revenue. With more than 30 million motor vehicles registered, California has the most passenger cars in the United States. Although EVs and gas-electric hybrids account for less than 8% of that currently, the numbers are rapidly increasing.

In an interview with ABC7, Caltrans spokesperson Lauren Prehoda highlighted the financial strain: “On average, Californians pay about $300 a year in state gas taxes. EVs have a $100 (annual) registration fee… that’s a $200 million a year loss." 

Caltrans estimates the average Californian driver clocks over 14,435 miles each year and ends up paying over $840 annually in car repairs due to damage caused by “our underfunded and deteriorating roadways.”

A National Trend: 

California isn’t the only state grappling with this challenge. As gas tax revenue dips nationwide, other states are exploring mileage-based user fees. Oregon, Utah, and Virginia have already implemented such programs, according to an Associated Press report from last year, while Hawaii plans to launch a similar initiative targeting EVs, starting in July 2025.

In a recent blow to similar policies, the Australian High Court last year struck down Victoria state’s road user charge on EVs, deeming it an unconstitutional federal power. This decision has been hailed as a positive step for EV adoption in Australia, where electric vehicles still lag behind.

Read Next: California Now Has 1 EV Charger For Every 5 Gas Stations

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