California’s Proposed Mileage Tax

California has announced its intention to overhaul its gas tax system. Traditionally states have been levying a gas tax. This means that they levy a tax on every gallon of fuel sold. The money so collected is used for the repair and maintenance of roads and highways in the state. However, critics have been arguing that this system has become inefficient and outdated and now needs to be replaced with a new system called the “mileage tax”. California is one of the first states to show interest in adopting the mileage tax system. However, this has led to considerable debate about the economic benefits related to this new tax system.

In this article, we will study more about the shortcomings of the gas tax and understand why mileage tax is touted to be the better alternative.

The Problem with Gas Tax

The problem with a gas tax is that they are no longer able to fund the construction and maintenance of roads. This is because of two reasons viz. vehicles with better fuel efficiency and vehicles with alternative fuels.

A gas tax is calculated per gallon of fuel. Hence, it does not matter whether a vehicle travels ten miles per gallon or twenty miles per gallon, they pay the same the same amount of tax. More fuel-efficient vehicles are good for the environment. They help in bringing down the carbon footprint. However, they are not good for gas tax revenues. Since the advent of more fuel-efficient vehicles, the gas tax has been consistently dwindling.

This is also the case with vehicles that use alternative fuels. Consider Tesla vehicles for instance. They are electric cars. As a result, they do not use gas. Hence, they don’t pay any gas tax. Many states have started levying flat fees which are included in the price of the car. However, even after the fee, the amount paid is very less as compared to what an average vehicle pays as a gas tax.

The bottom line is that the state is losing revenue every time a fuel efficient or a hybrid car is being sold. This is partly responsible for the shoddy condition of roads and highways. Repairing the inner cities was one of the election promises of Donald Trump. Hence, he too is often seen as a person who believes that the gas tax has become redundant. These are just assumptions made by the people. Donald Trump has never really commented about gas taxes or mileage taxes.

How Would A Mileage Tax Help?

A mileage tax would just be a different way of collecting money from people in order to build and maintain highways. This money is already being taken from the people. However, a new tax would change who the money is being taken from and how much of it is being taken.

A mileage tax would not be calculated on a per gallon basis. Instead, it would be calculated on a per mile basis. Hence, all vehicles will have to pay the same amount as mileage tax regardless of their fuel type or fuel efficiency. The mileage may vary depending upon the weight of the vehicle. For instance, a sedan may have to pay less mileage tax as compared to a pickup truck.

The mileage tax seems like a good idea in theory. It seems like this new tax will help the state governments make up for the shortfall in its tax revenues. However, there are many problems associated with the implementation of mileage tax as well.

Technological Challenges: Calculating the exact number of miles that a vehicle has run in a given period would be a technological challenge. There have been many systems proposed to achieve this. However, none of the systems have been foolproof. The gas tax was easy to collect from the people. However, for a mileage tax to be collected, a whole new system will have to be designed. Also, audit procedures will have to be defined. This is likely to be a systemic as well as a technological challenge since the means for accurately capturing and transmitting data from vehicles has not been developed till now.

Possible to Manipulate: There have been some systems which have been suggested. However, these systems are ridiculously easy to manipulate. This makes the entire system unstable. For instance, one system suggests that taxpayers take the picture of their odometer readings and send to the tax authorities. Programs need to be developed to detect pictures taken on another vehicle or pictures that have been photoshopped. However, in this system, there was no way to check if the taxpayer took a picture of the odometer at an earlier date and then later took a picture of the earlier picture and sent it across! There is no accurate system to know what the mileage of any vehicle really is. Hence, the implementation of a mileage tax would be chaotic, to say the least.

Privacy Issues: Some proponents have suggested that vehicles be fitted with devices that transmit the mileage data to the government on a real-time basis. However, this too can be manipulated. For instance, the taxpayer may fix that device in another car which is in the garage, and no mileage would get recorded. Apart from technical issues, there are also privacy issues. Many critics are against the government’s constant surveillance. A lot of people may not be opposed to the tax, but they may be opposed to the idea that the government should have the capability to keep a tab on people’s whereabouts.

Hence, mileage tax seems to be a good idea on paper. However, its application seems to be impractical and riddled with problems.


❮   Previous  Article Next  Article   ❯

Similar Articles Under - Globalization

View All Articles


Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


Globalization