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Offering Drivers $400 Gift Cards, California Seeks Alternative Source to Gas Tax Revenue

Bo Tefu | California Black Media

State officials are offering drivers up to $400 in gift cards as policymakers seek an alternative revenue stream to mitigate the loss in gas tax revenue due to an increase in electric vehicles.

Drivers will be allotted an amount based on the miles they drive. The state will pilot the initiative for six months starting in August this year.

The program has been organized to test proposed systems that aim to replace the gas tax with a reliable source of funding. The pilot program will test two payment methods. Payment will be calculated using either a flat per-mile rate or an individual rate based on a vehicle’s fuel efficiency.

According to the California Department of Transportation, the state’s excise tax on fuel purchases helps to repair and maintain roads. Currently, the state imposes a tax of 58 cents a gallon for gasoline and 44 cents per gallon for diesel. The state’s gas tax funds approximately 80 percent of highway and road repairs.

However, state analysts predict that the rising use of electric and hybrid cars is expected to decrease the revenue of gas tax in the upcoming years. A new ban on the sale of new gas-powered cars will also take effect in 2035, further shrinking the state’s gas tax revenue stream.

Lauren Prehoda, CalTrans’ Road Charge Program manager said that the state is testing a process to collect money that is easy for drivers, dependable for the state, and equitable for residents statewide.

“What’s happening right now as we see this growth in different types of vehicles,” said Prehoda. “We’re seeing this increasing unfairness in what people are paying,” she said.

The state has tried different tax initiatives since 2016 to find a feasible revenue stream to offset accelerating losses in gas tax revenue. State officials say they are concerned about the impact of such initiatives on rural areas and tribal communities using private and public roads.

In the latest study, the state is looking to work with 800 participants in California to participate in the program. Participants will pay a monthly mileage-based travel fee and receive credit for gas taxes or electric vehicle registration fees they paid to avoid being double taxed.

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