On September 29, 2014, California Governor Jerry Brown signed groundbreaking legislation into law that may make California one of the first states to impose taxes on drivers based on how many miles they drive. Currently, drivers pay taxes at the pump based on a per-gallon tax.
The new law (Senate Bill No. 1077) requires the California Transportation Commission to create a Road Usage Charge (RUC) Technical Advisory Committee. This committee will then “implement a pilot program to identify and evaluate issues related to the potential implementation of an RUC program in California by January 1, 2017.” The test program could cost anywhere from $1 million to $20 million.
Why is California moving toward a mileage-based driving tax?
Not surprisingly, the primary motivation for the new legislation was that current revenues to maintain roads and improve infrastructure are insufficient. California believes the legislation is an effective mechanism to meet California’s long-term revenue needs as cars became more efficient and require less fuel. The state expects that by 2030, up to half of the revenue currently collected under the per-gallon tax will be lost to increased fuel efficiency.
Given the regressive nature of California’s current gas structure, a mileage-based driving tax can distribute the gas tax burden across all vehicles regardless of fuel source. California believes it is important to explore options to obtain new revenue sources in place of its current “antiquated gas tax structure.”
Criticism of California’s mileage-based driving tax
The new legislation, however, has been met with some level of criticism. Santee Assemblyman Brian Jones criticized the new legislation: “This will have a devastating effect if it goes any further than just a study – people will travel less, contribute to our local economy less, but the taxpayers will pay more.” What is more, Assemblyman Jones believes it will force more people into urban areas thereby disenfranchising rural residents.
In addition, there are certain privacy concerns regarding the government tracking the driving habits of California residents. The legislature recognized this concern and the bill provides that, “The agency shall not disclose, distribute, make available, sell, access, or otherwise provide for another purpose, personal information or data collected through the RUC program to any private entity or individual.”
This provision notwithstanding, there is always the potential for an unexpected data breach and unintended disclosure and use of such personal information.
Contact a California tax attorney
If California does eventually move forward with a mileage based driving tax, businesses that are impacted by transportation costs will need to plan appropriately. For example, UPS will have less of an incentive to avoid left turns, which strategy has saved the company almost 10 million gallons of gas since 2005.
If you have any questions regarding California tax reporting or compliance issues, Janathan L. Allen, APC’s experienced California tax attorneys can help you or your business plan appropriately and minimize liability. Contact our tax attorneys today for a free consultation or visit us at one of our Southern California offices.