California's Gas Tax Is Drying Up. Just Thinking About A Plan B Makes Politicians Nervous.

California lawmakers have known for decades that gas tax revenue that keeps the state’s roads from crumbling is drying up.

Doing something about it is a different story.

California, like all states to varying degrees, has relied for more than a century on state and federal gas taxes to maintain thousands of miles of roadways and bridges. The emergence of electric vehicles and more fuel-efficient gas cars has upended the system by reducing the amount of gas sold in the state and cutting into California’s bottom line.

The problem is particularly acute in California, which has aggressively pushed EV adoption as a response to climate change. The state’s independent legislative analyst estimated in a 2023 report that California could lose $5 billion each year by 2035 if EV adoption continues to grow.

Despite the risks, California is nowhere close to being ready to switch from gas taxes to another revenue collection model. To understand why, look no further than last week’s political maelstrom over a bill that called simply for a study to be done on the feasibility of a mileage tax.

The bill, AB 1421, went viral after Republican lawmakers slammed it as a new tax on California drivers during a debate on the Assembly floor late last month. The measure passed the chamber, but the opposition sparked anger across the state. Legislative staffers in Sacramento say they fielded dozens of calls about the bill last week, while posts flooded social media criticizing it as government overreach.

“Californians are already getting crushed by the cost of food, housing, power, and gas,” said Republican Assembly Leader Heath Flora. “We already pay the highest gas taxes in the nation. Now Sacramento is talking about adding a new tax for every mile people drive.”

The issue caught fire enough that even Gov. Gavin Newsom’s press office weighed in, arguing in a social media post that a study bill is not the same as enacting a new policy, but also making clear that Newsom wouldn’t greenlight a mileage tax if one landed on his desk.

“There is no mileage tax proposal in California — and the Governor would not sign one,” his staff wrote.

Alan Jenn, an assistant professor at UC Davis and an expert on policies charging drivers for road use, said the governor’s response reflects how gas tax policy remains a political hot potato Newsom would prefer not to touch as he prepares for a widely anticipated presidential run.

“You don't want to be making a decision on such a controversial topic when you're trying to run for president,” Jenn said.

The fallout is the latest example of the political risks of even discussing reforms to the gas tax, which has long been considered a third-rail issue in Sacramento. The Republican Party and anti-tax groups recalled state Sen. Josh Newman — who represented a tightly-contested Orange County district — in 2018 after the state approved a 12-cent-per-gallon hike the previous year, a moment that still resonates in the Capitol.

Assembly Transportation Chair Lori Wilson, who is leading the push to study a mileage tax after a decade of state-run pilot programs, framed the recent incident as a manufactured outrage by Republican lawmakers seeking to score political points.

“What I was surprised by was the outright lies,” Wilson said. “That's what surprised me, because it moved beyond just stretching the truth to just bold-faced lying.”

The Democratic candidates to replace Newsom have so far avoided taking a stance on a mileage tax. Betty Yee and Ian Calderon, along with spokespeople for Tom Steyer and Antonio Villaraigosa, all said that a bill to study the concept is appropriate, but raised concerns about the potential of increased costs and disproportionate impacts on drivers with longer commutes.

Jenn said the kerfuffle crystallizes a significant political hurdle Democratic lawmakers will have to overcome before seriously pushing for an alternative to the gas tax: few drivers understand how gas taxes are collected, how much they actually pay or that a mileage tax would replace the old system.

“Public awareness and education is such a huge component,” Jenn said. “The type of response that people have is totally disconnected from the way a road usage charge would actually get implemented."

“It's an easy political target,” he continued.

While blue states that incentivize EV purchases will face the fiscal cliff sooner, lawmakers across the political spectrum are exploring options to replace gas taxes as hybrid vehicles gain in popularity.

Three states — Oregon, Utah and Virginia — have developed voluntary mileage tax programs for EV drivers that officials say have received positive feedback from the small number of drivers who’ve signed up. But challenges related to voter education and data privacy remain in expanding those programs statewide.

State leaders shouldn’t expect help from the federal government in the near future.

Congress last raised the national 18.4-cent-per-gallon gas tax in 1993, and lawmakers have instead turned to tapping the country’s general fund to pay for infrastructure expenses. A national mileage tax pilot program included in the Biden administration’s Infrastructure Investment and Jobs Act didn’t gain traction.

Despite the political challenges, the push to consider mileage taxes is unlikely to be dropped in states like California, where influential labor unions are urging lawmakers to maintain revenue and keep projects that employ their members on track.

Transportation California, which represents unions including Laborers’ International Union of North America and NorCal Carpenters, is the lead sponsor of AB 1421.

“If we don't try to start thinking now about thoughtful, responsible, fair and affordable solutions, our infrastructure is only going to deteriorate,” said Kiana Valentine, executive director of Transportation California. “California is already putting off projects today, and that is only going to grow with each year that the funding system remains antiquated.”

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