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Should California Tax Mileage Instead of Gas?


 Fuel efficient vehicles are a good thing. Not so their impact on gas tax revenue.

In California as in many other states, sales tax on gasoline pays to maintain roads, bridges and other transportation systems. And California, like other states, now finds itself struggling to maintain transportation in the face of decreasing gas tax revenue.

One reason for this is falling fuel prices, which are affecting revenue across the United States and in oil-producing countries such as Nigeria. Another reason is the number of fuel-efficient vehicles travelling the roads, like the Toyota Prius, the Chevrolet Volt, and the Tesla. The more efficient the vehicle, the less gas is purchased and the less gas tax revenue ends up in state coffers. And while fuel prices will surely rebound, one hopes the trend toward more fuel-efficient vehicles will stay.

According to Governor Jerry Brown, there is a “$59 million backlog on highway maintenance.” Replacing the gas tax with a tax on miles driven could be the solution.

Last fall, the governor approved Senate Bill 1077, which creates a road usage charge pilot program. The bill states the following:

  • “Road usage charging is a policy whereby motorists pay for the use of the roadway network based on the distance they travel. Drivers pay the same rate per mile driven, regardless of what part of the roadway network they use.
  • A road usage charge program has the potential to distribute the gas tax burden across all vehicles regardless of fuel source to minimize the impact of the current regressive gas tax structure.”

SB 10077 does not create a new tax or alter existing taxes. It does mandate the creation of a Road Usage Charge (RUC) Technical Advisory Committee, which will “explore alternative revenue sources that may be implemented in lieu of the antiquated gas tax structure now in place.”

Pilot program

An RUC pilot program will be implemented by January 1, 2017, and will submit a report of its findings by June 30, 2018. It has the following tasks:

  1. “Analyze alternative means of collecting road usage data, including at least one alternative that does not rely on electronic vehicle location data.
  2. Collect a minimum amount of personal information including location-tracking information, necessary to implement the RUC program.
  3. Ensure that processes for collecting, managing, storing, transmitting, and destroying data are in place to protect the integrity of the data and safeguard the privacy of drivers.”

The California gas tax rate of 36 cents per gallon has not changed since 1994. Californians also pay a 2.25% sales tax on gas and a 9.67% tax on diesel fuel.

Stay on top of fuel tax and sales tax changes in California and other states. Learn more.

photo credit: Rainforest Action Network via photopin cc


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.