The Financial Burden on Urban Drivers Would Increase if California Were to Switch from a Fuel Tax to a Flat-Rate Mileage Fee

New research from the Mineta Transportation Institute (MTI) finds that replacing California’s fuel tax with a flat-rate mileage fee would transfer costs from rural to urban drivers. The study, Charging Drivers by the Gallon vs. the Mile: An Equity Analysis by Geography and Income in California, compares fuel tax and mileage fee costs for urban vs. rural drivers, as well as for drivers at different income levels.

The study found that switching from per-gallon fuel taxes to a flat-rate, per-mile road-user charge transfers costs from rural to urban households because rural drivers tend to drive less fuel-efficient vehicles than do urban households. “Shifting costs from inefficient to fuel-efficient vehicles is troubling from a climate policy perspective,” notes study author Samuel Speroni. “The gas tax encourages people to choose efficient vehicles by having drivers of gas-guzzlers pay tax on that extra fuel consumed per mile. However, that incentive is lost with a flat-rate mileage fee.”

The study also found that replacing the fuel tax with a flat-rate mileage fee would modestly raise costs for the lowest-income urban households by about $27 annually. Study author Asha Weinstein Agrawal explains, “Although the cost increase is less than a dollar per week, it is still an added burden for those households with the fewest resources to cope.”

Other study findings include:

• The average rural household drives 18% more miles per week than the average urban household (503 vs. 427 miles).
• The highest-income households drive 61% more miles per week than the lowest-income households, on average (524 vs. 325 miles).
• Current state fuel taxes cost the average rural household $13.31 per week. In comparison, the average urban household pays $10.10 weekly.
• Shifting from the state fuel tax to a revenue-neutral, flat-rate mileage fee would push household costs down by an average of less than a dollar per week for most rural households. This would push costs up by an average of less than a dollar per week for moderately-wealthy rural households and all urban households.

The authors conclude that although replacing fuel taxes with a flat-rate mileage fee raises potential equity and climate concerns, policymakers could address both with  differentiated mileage fee rate structures. One option is an increasing-block-pricing rate structure: a vehicle owner pays no fee or a very low rate for the initial set of miles driven annually, and then higher rates for additional miles driven that year. The state could also offer a lower mileage fee rate to qualifying low-income households, similar to the “lifeline” rates that utilities offer to low-income customers. Finally, the state could set mileage fee rates higher for less efficient vehicles and lower for more efficient vehicles.

ABOUT THE MINETA TRANSPORTATION INSTITUTE

At the Mineta Transportation Institute (MTI) at San Jose State University (SJSU) our mission is to increase mobility for all by improving the safety, efficiency, accessibility, and convenience of our nations’ transportation system. Through research, education, workforce development and technology transfer, we help create a connected world. Founded in 1991, MTI is funded through the US Departments of Transportation and Homeland Security, the California Department of Transportation, and public and private grants, including those made available by the Road Repair and Accountability Act of 2017 (SB1). MTI is affiliated with SJSU’s Lucas College and Graduate School of Business.

ABOUT THE AUTHORS
This research was conducted as part of the California State University Transportation Consortium (CSUTC). Samuel Speroni, MURP, is a doctoral student in Urban Planning at UCLA. Asha Weinstein Agrawal, PhD, is Director of the Mineta Transportation Institute’s National Transportation Finance Center. Michael Manville, PhD, is Associate Professor of Urban Planning at UCLA. Brian D. Taylor, PhD, FAICP is Director of the Institute of Transportation Studies at UCLA.

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