California Faces Budget Deficit as EVs Rise in Popularity
California, the largest market for electric vehicles (EVs) in the United States, is grappling with a significant budget shortfall due to the decline in revenue from its gasoline tax. As more drivers switch to battery-powered cars, the state’s reliance on gasoline tax to fund road maintenance is becoming increasingly unsustainable. In response, lawmakers are considering implementing a mileage-based tax system as an alternative.
According to Lauren Prehoda, a spokesperson for Caltrans, maintaining California’s road network costs approximately $8.5 billion annually, with the majority of this funding coming from taxes collected on gasoline purchases. As EVs and hybrids gain popularity, California is losing out on gas tax revenue. In 2022 alone, there were approximately 1.1 million electric cars and 1.3 million hybrids on California roads, resulting in an estimated annual loss of $200 million.
To address this issue, Caltrans has proposed a solution called the California Road Charge. Under this system, motorists would be taxed based on the number of miles driven annually instead of their gasoline usage. While the specific rate has not been established yet, a cost simulator on the program’s website suggests potential rates of $.02, $.03, or $.04 per mile. The simulator also highlights that some drivers could potentially save money under this new system. For instance, a driver covering 1,000 miles per month in a 2023 Honda Pilot would pay between $20 and $40 through the Road Charge, compared to the $27.57 they currently pay in monthly fuel taxes.
One of the key advantages of the California Road Charge is that motorists would have the flexibility to choose how their mileage is tracked. They could opt to use an electronic device or their car’s built-in tracking system, or they could simply provide a picture of their odometer to Caltrans. This approach aims to accommodate varying preferences for managing data privacy and efficiency.
In August 2024, California is set to launch a pilot program to test the viability of the Road Charge. Interested drivers can sign up on the California Road Charge website, and participants will be selected in July 2024. Selected drivers will be required to make monthly Road Charge payments between August 2024 and January 2025 and will be asked to complete two surveys about their experience. At the end of the program, participants will receive a refund of their gasoline tax or EV registration fee, with the added incentive of up to $400 in gift cards provided by Caltrans.
The data gathered during the pilot program will play a crucial role in informing lawmakers’ decision on whether the Road Charge should replace the state’s gasoline tax. With California aiming to ban the sale of gasoline-powered cars by 2035, it is essential to find an equitable and sustainable solution for road maintenance funding in the future. By exploring alternatives like the Road Charge, the state seeks to adapt to changing transportation trends while ensuring the necessary resources for road infrastructure upkeep.
