State to Explore Mileage-Based Fees in Response to Declining Gas Tax Revenue

The rise of electric and fuel-efficient vehicles is likely to blame.

Gas tax revenue peaked in 2006 and 2007 and has been declining since. Tax revenue still weighed in at a hefty $2.6 billion in 2013, down from roughly $2.8 billion during the mid-2000s peak.

But the writing is on the wall, or road, as people are simply using less gas. That is certainly a good thing when looking through the environmental lens, but road repairs need to be funded somehow.

So with folks still piling on the miles, why not ditch the gas tax in favor of mileage-based fees?

But before you sneer, hear us out California…

  • Let’s say you have a considerable daily commute… (60 miles one-way, for the sake of easy math)
  • Your car gets a respectable 30 miles to the gallon…
  • So that is 120 miles roundtrip using 4 gallons of gas, right? Right!

Now let’s look at the two revenue models.

  • First, the current gas tax, California’s is no slouch, the 60.75 cents paid on every gallon is 4th highest in the country.
  • That works out to $2.43 in gas tax daily, not too bad. (4 gallons X 0.6075 cents/gallon)

Next, let’s examine mileage-based fees.

  • The RAND Corp. suggests a 1.1 cents charge per mile driven.
  • At 120 miles, that is $1.32 in daily mileage fees. So even for the commute heavy driver, you are saving a little more than a buck day. (120 miles X 1.1 cents/mile driven)

The RAND Corp. projects that the 1.1 cents per mile fee would yield 20% more revenue than gas taxes through 2030.

The only losers under this model are those owning an electric car, but they get to look super cool in their Fremont-built Tesla cars.

Jim Madaffer, chairman of the California Road Charge Technical Advisory Committee, compared it to a utility bill in that you pay for what you use. He also stated that “We’re probably talking five to 10 years before we’ll see this as a viable method.”

For the full story on mileage-based fees, see here.