Replacing the Gas Tax to Stabilize Road Funding

Loren Kaye
President of the California Foundation for Commerce and Education

One of the few recent initiatives to improve California’s economic base was left undone when the Legislature recessed this fall without addressing transportation finance.

Governor Brown called a special session to fill what he estimated as a $5.7 billion annual hole in highway, bridge and road maintenance and upkeep. The Legislature remains at a standoff over whether the new money should come from increased taxes or revenue surpluses.

But no matter how the special session is resolved, the fundamental structure of transportation finance is unsustainable. Taxation of gasoline is inadequate to meet the needs for system repairs and improvement because gasoline use is becoming disconnected from road use. In a triumph of technology and market forces, cars have become far more fuel efficient, driving down revenues from the gas tax. Public policy is also lining up against the internal combustion engine, which is the sole consumer of taxed gasoline.

Recognizing the long-term inadequacy of taxing gasoline, state leaders commissioned a task force of private citizens to recommend a design and test of the next generation in road finance – a fee based on the actual use of the state transportation network. That group – with the ungainly moniker, California Road Charge Pilot Program Technical Advisory Committee – recently concluded its deliberations and provided recommendations to the Brown Administration. I was honored to be a member of this committee, representing business and economic interests.

Consistent with the authorizing legislation, the committee recommended a road test of a highway user charge that puts a premium on user choice and personal privacy protection. In the spirit of a true user charge, the proposal envisions a broad application of the mileage fee, with no exemptions and no rate differentials – at least in the testing phase. The Committee also anticipates the user fee would be set at a rate to offset the gasoline tax. In other words, this fee would be a replacement revenue source, not an additional tax. Since the fee no longer depends on gasoline use, erosion of the tax base will stop, resulting in more funds for roads and highways over time.

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