California is testing a new mileage-based tax for electric vehicle owners, following a global trend that has seen the UK and New Zealand shift towards road funding models based on usage rather than gasoline consumption.
The objective is the same everywhere: to offset the gradual collapse of fuel tax revenues, without putting a brake on the transition to electric mobility. However, the debate over fairness and political acceptability rages, in a politically fraught environment.
California seeks a Plan B
In California, about 80 percent of road network maintenance is funded by a gasoline tax of about 61 cents per gallon, a financial foundation that is eroding as sales of EVs increase and the state aims for carbon neutrality by 2045.
To test an alternative, a pilot project is imposing a levy on EV owners ranging from 2 to 4 cents per mile driven, a formula designed to make those who use the roads pay for them, regardless of the fuel used.
However, this solution has two major blind spots: the cost of implementation, particularly the installation of mileage tracking devices, and its potential impact on motorists who drive long distances, often in rural areas, for whom the cost could quickly become significant.
In the UK
Just a few days earlier, the UK announced its own version of the mileage tax, which is simpler to explain: starting in April 2028, electric car drivers will pay 3 pence per mile, while plug-in hybrid owners will be charged 1.5 pence per mile.
Official projections estimate that this new levy could generate over a billion pounds in the first full year of application, with a further increase expected in the early 2030s.
Politically, London openly accepts that the tax is designed to replace some lost fuel duties, while acknowledging that it risks making EVs less attractive and reducing projected EV sales by 2030.
In New Zealand
New Zealand has gone even further by deciding to progressively migrate all of its road funding to electronic "road user charges," paid by all vehicle types based on distance traveled and, in some cases, weight. The country already has long experience with per-mile charges for heavy goods vehicles and diesel vehicles, and the goal is eventually to replace the gasoline tax, which no longer reflects the reality of an increasingly electrified fleet.
The combined revenues from these charges, fuel taxes and registration fees currently amount to around $4 billion (New Zealand dollars) per year. The government is counting on user-based pricing to stabilize this revenue while correcting the perception of inequality between internal combustion and electric vehicle drivers.
Three models
Underlying this issue, California, the UK and New Zealand face the same dilemma: how to tax road usage without torpedoing EV adoption, as EVs continue to be costlier to purchase to begin with. The UK sets a clear price line (3 pence/mile), while New Zealand uses its transition to electronic road charges as a way to modernize road taxation as a whole.
California, for its part, has not yet officially decided and has to contend with technical challenges, privacy concerns and the fear of shifting the tax burden toward households that have no choice but to drive long distances. It remains to be seen whether this kind of tax could emerge in Canada.
