Is California Introducing a Mileage Tax? AB 1421 Explained
What if instead of paying taxes at the gas pump, California charged you for every mile you drive? That’s not law yet, but our state just took a major step closer to it. That step is called AB 1421, and today, we’re going to unpack what it is, what it isn’t, and why this conversation matters right now. Buckle up because when it comes to increasing taxes, I have a LOT to say!
What is AB 1421?
There has been a lot of conversation lately around a recent initiative in California that could eventually lead to an entirely new tax structure for drivers, and all of this is bubbling up now because of the passage of AB 1421, which passed through the California Assembly at the end of January. If you’ve been seeing headlines or social media posts claiming that California has just passed a “mileage tax,” then it’s really important to level-set right off the bat and clarify that no, California has not enacted a mileage tax.
AB 1421 does not create or implement a new tax structure. So, we can all take a breath. But it’s super important to understand that AB 1421 isn’t nothing, either. What this bill actually does is extend the life of a state-level committee that has been studying something called a road usage charge, which is essentially the framework for a potential future mileage-based tax system.
To break this down, AB 1421 doesn’t impose a mileage tax, but it keeps the door open for the possibility of one in the future. The bill extends the work of what’s called the Road Usage Charge Technical Advisory Committee all the way through 2035.[1] So right now, California lawmakers are not voting on a mileage tax itself, they’re voting to continue the research, pilot programs, and groundwork for what could become the next major shift in how drivers are taxed.
Now of course, as Californians, even if this isn’t law today, it’s something we should absolutely be paying attention to, because these “studies” are where the big policy changes that we talk about here week to week begin.
Gas vs. Mileage Tax Explained
Let’s step back and understand each part of what’s going on here, starting with the issue at the center of the conversation: the gas tax. Currently in California, you pay a tax on each gallon of gas that you buy when you fill up your car at the gas station. As of 2025-2026, this is 61.2 cents per gallon. Technically, this gas is leveraged on gasoline providers who deliver the gasoline to gas stations, but, per the Legislative Analyst’s Office, it’s well proven that nearly all this tax is passed on to consumers at the pump.[2] So, if your car holds 14 gallons of gas, you’re paying approximately $8.57 just in California taxes, excluding federal taxes, and sales tax. Compared to other states, this constituted the highest gas tax across the nation in 2025,[3] and that’s on top of the highest average gas prices across the country as well.[4]
Why does our state have a gas tax? The revenue from this tax is dedicated exclusively to transportation costs, meaning it is put toward highway and road maintenance, street and local road repair, public transit improvement, and other transportation projects. Our state’s constitution actually keeps these revenues separate from the General Fund so that they will only go toward these transportation-related expenses.[5] The total revenues this tax raises is not insignificant – projections for the 2025-2026 fiscal year expect to have generated $7.6 billion just from gasoline sales.[6] So clearly, this is a core revenue stream that funds transportation systems and projects.
But California is trying to move away from this gas tax model. Why? Politicians cite the fact that our gas tax revenues are declining, and they say they are declining largely because of California’s push toward electric vehicles. Per the LAO back in 2023, they projected a 31% decline by 2033, which would mean substantially less funding for road maintenance and transportation projects.[7] The thought process is then that our state needs a better way to raise revenue that will fuel all of the expenses that come along with accommodating millions of drivers in the state and pushing forward new transportation projects.
So, the new idea that has been floated around is the idea of a mileage tax, or vehicle miles traveled fee (VMT). This is a system that does exactly what its name says – it would require drivers to pay a flat rate based on the number of miles they drive rather than on gallons of gas purchased. For example, if the rate was 3 cents per mile, and you drove 12,000 miles in a year, you would pay $360 annually. Lawmakers argue that moving from a gas tax to a mileage tax not only will raise more stable revenues, but that it is also a fairer approach, given that owners of electric vehicles use the roads too and benefit from maintenance as well, and so every driver should be paying in to that system.
This all circles back to AB 1421. California has been “studying” the concept of a mileage-based tax system for over a decade at this point.[8] In 2017 California completed a pilot program involving more than 5,000 vehicles and over 37 million miles reported. This program highlighted a lot of issues, like how to collect mileage and structure fees fairly, how to protect privacy in reporting, among other complications.[9]
Since then, legislation has extended the committee’s life to continue “research” and analysis on how a mileage tax would work for transportation funding. Supporters of AB 1421 argue that without understanding potential replacement options for the gas tax, California will face a funding gap in the years ahead, and that this committee is a necessary component of responsible planning.
So here are the key takeaways about the mileage tax issue in California. AB 1421 extends research and reporting, it does not create a new method of taxation. California has been studying this for years and just approved the continuation to do so. And, extending the study doesn’t automatically lead to a mileage tax, but it keeps the policy conversation alive and could lay the groundwork for future legislation.
Three Major Problems
With all of that said, if our state is pouring time, and legislation, and yes – money into a topic that seems likely to be up for passage in the future, then it’s important that we understand and respond to it. So, while there is NOT a mileage tax on the table today, it’s important that you and I think through if a mileage tax makes sense or not and then advocate one way or the other for either its passage or its dismantling.
When it comes to both the gas tax and the mileage tax, I see three major problems.
Problem 1 – Practical Questions
First, implementing a mileage tax raises huge questions. This does not mean that the premise is necessarily bad. I can agree that all divers use the roads, and that road maintenance is a good thing, and so it makes sense in theory that all drivers should contribute toward the costs it takes to upkeep the very thing they are using.
But just practically, think through how this would work. A mileage tax requires reporting. It requires our state government to somehow know how many miles you drove in a year precisely to be able to assess the tax you owe. If this number is self-reported, this invites massive fraud. Do you think that people will really be honest about the number of miles they drive? That means any type of self-reporting or odometer reading cannot be accepted at face value by the government, but will require anti-fraud and validation measures – all requiring more employees and more money. On the flip side, if it is not self-reported but is electronically monitored, then we get into the territory of privacy concerns. Conservatives are already raising the alarm about GPS tracking and government surveillance.
Then comes the issue of what rate to charge, and will it be the same rate across the board? The fairness questions here are massive. Right now, the gas tax may be imperfect, but at least it has some built-in proportionality, meaning that heavier vehicles, gas guzzlers, and commercial trucks pay more because they use more fuel and cause more wear and tear to the roads. Under a flat mileage tax, does a Prius pay the same per mile as a heavy-duty work truck? Does a rural commuter pay more simply because they live farther from everything?[10] These are all practical questions that reveal that this type of tax system is not as fair and straightforward as our state politicians like to make it out to be.
Problem 2 – High Taxes & Mismanagement
But to take it a step beyond just the practical questions of what this type of system would look like, there is a greater question at play – which is, does our state even need this revenue and are we assured that it is being spent effectively? Notice that our legislators and our representatives are not talking about ways to reduce spending in light of potentially receiving less revenue – instead they jump to an entirely new tax structure. This is a bad premise to start with, and this is the second problem I see with a mileage tax.
California takes in SO much money in tax revenue year over year. In 2025, California had the fourth highest overall tax burden in the country, at a total of a whopping 11%, just behind Vermont, New York, and Hawaii.[11] Yet, even with all the taxes our state brings in, we are consistently, year over year, in a deficit. If we step outside of the gas tax for just a minute, in the most recent budget forecasts, California’s tax revenue is running ahead of expectations, largely driven by strong personal income tax collections from high-income earners and capital gains.[12] But the increase in revenue isn’t keeping up with spending growth.
The LAO’s 2025–26 and 2026–27 budget outlook shows that revenue is forecasted to grow at just above 4% annually, while spending is projected to grow around 5.8 %, which is considerably faster.[13] This means that even with overall revenue increases, our state already anticipates operating deficits in future years unless spending is cut or taxes are further increased. But do you ever hear about our government taking steps to cut spending? No! It’s always about how to raise more money, how to levy additional taxes, how to get more from YOU rather than how to spend your money well.
Here's what we need to understand and be reminded of about taxes: taxes should be as low as literally possible – they should be a necessary evil, but not a tool for your government to take advantage of you. Our government should have to get smart about ways to cut costs and use funds well, not just lean on the easier path of raising taxes or creating new taxes entirely. Our Founding Fathers knew that some taxes had to be levied – they weren’t full anarchists, and they understood that we need money to run a functioning government – but they were also deeply suspicious of government power, and they understood taxation as something that must be tightly restrained. They did not build this country on the idea that the state should be endlessly expanding, endlessly extracting, endlessly managing every part of life. They knew that government power is dangerous by nature and therefore must be limited. Taxation is one of the clearest examples of that danger.
Taxation is taking money from people – and that requires the government to provide justification for why it can and should do that. When the government can take more and more from you without justification, then it can control more and more of your life. And so, we must remember that government must be restrained, and that includes government spending. Taxes are meant to be limited, transparent, and accountable, because every dollar taken is a dollar not freely spent by the citizen. The government should only take from you what is truly necessary to perform its legitimate functions.
California has not met this standard. California has continued to increase the spending and mismanage the funds it has been given, in a way that is blatantly disrespectful to the taxpayer. The goal of our governor and our legislature has not been to REDUCE taxes – their outlook is that you have more money to give, and they have more places to spend it, so hand it over! In fact, in the seven budgets that Gavin Newsom has signed during his tenure in office, total spending has increased by 72%. That’s huge! Budgeted spending has increased from $203 billion to $349 billion.[14]
So then, when California lawmakers come crying to us that they aren’t making enough from taxpayers – even though we pay some of the highest taxes of any state – and that projections from the gas tax are dipping, I just don’t believe that they are using our money for the bare necessities of the services they must provide to us. Not when the budget has over doubled in under a decade!
Not to mention the fact that if you look at transportation spending, it is littered with mismanagement and waste. It’s easy to hear “road maintenance” and think, “well I want potholes to be fixed, and I want lanes to be clearly visible,” but that’s not what we’re talking about here. There are several high‑dollar programs and project choices in California’s transportation budget that are wasteful and mismanage the money they have been given.
For instance, starting in 2019, 20% of gas tax revenues are dedicated to railways and mass transit, and another 100 million dollars per year is set aside to build bike paths, and walking paths.[15] While these might not be bad initiatives, clearly millions of gas tax revenue is used to fund alternatives to driving – like walking, biking, and public transit – and is not spent on repaving roads, which is not what we have been told the gas tax is for. Are these really essentials? Could we not cut or reduce this spending so that we don’t have to increase taxes?
Or take for another example that again in 2019, Governor Newsom issued an executive order directing the state to use transportation dollars “to help reverse the trend of increased fuel consumption and reduce greenhouse gas emissions.” In response, Caltrans proposed delaying funding for several Highway 99 widening projects in the Central Valley and re‑directing about 61 million dollars in SB 1 funds to “priority rail projects and other priorities” aligned with the order.[16] Again, is this necessary spending? Should your taxes be increased – not to improve your highways – but to fund our government’s pet climate project?
Clearly this issue is far more complicated than just – well everyone uses the roads and therefore should contribute to their maintenance. This money is NOT being spent purely on maintenance or on road projects that benefit us all, and until California cleans it up, they absolutely should not be taking more money from us, in any form of tax.
Problem 3 – The EV Problem
And lastly, the final and most important problem I see here is that the entire argument for switching the gas tax to a mileage tax is built on a house of cards. As I explained, the reason for this debate at all is based on the premise that gas tax revenues are decreasing because electric vehicle use is increasing – but none of that has actually happened. It’s all based on projections and forecasts, but in real time gas tax revenue has not seen a significant decrease. The projections for a decrease in these revenues were originally based on California’s requirements to eliminate all sales of new, gas-powered cars by 2035 – but that was blocked by the U.S. Senate last spring, rendering that mandate as effectively dead.[17]
EV adoption has been much slower than the “explosion” California planners projected into long‑term gas‑tax panic. By the end of 2025, more than 80% of new cars sold in Q4 were still gasoline or hybrid, so the new‑car market is far from a rapid all‑EV takeover.[18] A 2025 EV market report notes that California’s EV share of new light‑duty sales slipped from about 25.3% in 2024 to about 22.9% in 2025, indicating a cooling rather than a continued surge.[19] So, the argument that the gas tax is going to decline is based on aggressive EV targets set by our delusional government that thinks our state is moving toward all electric vehicles – that is just not true. Until we see these declines actually pan out in reality, there is absolutely no need to move to a mileage tax.
AND, just for the cherry on top of the cake – even if NONE of that was convincing, and our government still wants to argue “mileage tax is a fairer option because electric vehicle owners should still have to contribute their share of taxes,” then let me tell you that EV owners in California pay a special annual "Road Improvement Fee" during registration renewal to compensate for not paying state gasoline taxes. As of this year, this fee typically averages $153 annually and increases year over year.[20] So, remind me again why we are even talking about this?
Why This Matters Today
All of that was a lot of information, so let’s reset and zoom out of the details to wrap up why we should care about this today and what you can do about it all.
Most major policy shifts and decisions in our state don’t happen overnight. All of the policies we cover on this show start with a basic premise – and if we miss that premise, and then miss the subsequent arguments that build on top of it, then we miss the ability to respond early and to point out the flawed logic being used to craft a narrative that is later harder to dismantle. If we pay attention now, if we pushback now, then we have the power to affect the outcomes of the studies put in place and the public perception of what is really going on. People need to understand this isn’t a question of fairness and the EV market isn’t a giant, growing threat to California’s transportation costs. If we can clarify just those points alone, the entire argument for the mileage tax falls apart. And then, we can continue doing the work of advocating for more limited government, less waste, more efficient spending – and hopefully abolish the gas tax altogether, with nothing poised to take its place!
This is not a question about transportation spending, this comes down to basic principles of money mismanagement and government overreach. And so right now is the time to expose this issue for what it is, to hold our leaders accountable, and to speak out against the mileage tax BEFORE it is proposed or signed into law. This moment is important NOW because this is where we lay the groundwork to inform the people around us of what’s really going on and to stop the deception before it starts.
AB 1421 may have just extended a study for now, but studies become policies, policies affect people – and that is precisely why paying attention now matters.
References:
[1] CalMatters, “AB 1421: Vehicles: Road Usage Charge Technical Advisory Committee,” Digital Democracy, January 29, 2026, https://calmatters.digitaldemocracy.org/bills/ca_202520260ab1421.
[2] Legislative Analyst’s Office. “California’s Transportation System,” 2026. https://lao.ca.gov/Transportation/FAQs.
[3] Cruz-Martínez, Gabriella. “Ten States With the Highest Gas Tax in 2025.” Kiplinger, September 5, 2025. https://www.kiplinger.com/taxes/state-tax/603259/states-with-the-highest-gas-taxes.
[4] Davis, Maggie. “US Gas Prices Decrease by as Much as 15% — See Where Your State Stacks Up.” LendingTree, February 13, 2026. https://www.lendingtree.com/credit-cards/study/us-gas-prices/.
[5] LegalClarity California. “How California Gas Tax Revenue Is Collected and Spent - LegalClarity.” LegalClarity, December 11, 2025. https://legalclarity.org/how-california-gas-tax-revenue-is-collected-and-spent/.
[6] Legislative Analyst’s Office. “California’s Transportation System,” 2026. https://lao.ca.gov/Transportation/FAQs.
[7] Lazo, Alejandro. “California Gas Tax Revenue Will Drop by $6 Billion, Threatening Roads.” CalMatters, December 15, 2023. https://calmatters.org/environment/2023/12/gas-tax-revenue-drop-climate/#:~:text=According%20to%20a%20state%20analysis%2C%20California's%20gas,gasoline%20and%20diesel**%20*%20**Fewer%20gas%2Dpowered%20cars**.
[8] DeSaulnier. “SB 1077 Senate Bill – CHAPTERED.” LegInfo California, September 29, 2014. http://www.leginfo.ca.gov/pub/13-14/bill/sen/sb_1051-1100/sb_1077_bill_20140929_chaptered.htm#:~:text=3091.,the%20purposes%20of%20academic%20research.
[9] Leahey, Andrew. “California Mileage Tax—Pilot Programs and Permanent Policy Inertia.” Forbes, January 30, 2026. https://www.forbes.com/sites/andrewleahey/2026/01/30/california-mileage-tax-pilot-programs-and-permanent-policy-inertia/.
[10] Ward, James. “California ‘mileage Tax’ Claims Went Viral. What AB 1421 Really Means.” The Desert Sun, February 6, 2026. https://www.desertsun.com/story/news/nation/california/2026/02/06/california-road-usage-fee-study-what-drivers-should-know/88547042007/.
[11] Bramwell, Jason. “How The 50 States Rank by Tax Burden (Updated for 2025).” CPA Practice Advisor, April 2, 2025. https://www.cpapracticeadvisor.com/2025/04/01/how-the-50-states-rank-by-tax-burden-updated-for-2025/158094/.
[12] California Legislative Analyst’s Office. “The 2025-26 Budget: California’s Fiscal Outlook,” November 20, 2024. https://lao.ca.gov/Publications/Report/4939.
[13] Ibid.
[14] Walters, Dan. “Here’s How Newsom’s Spending Binge Outstripped Revenues, Creating California’s Chronic Deficit.” CalMatters, February 13, 2026. https://calmatters.org/commentary/2026/02/newsom-spending-california-chronic-deficit/.
[15] McGreevy, Patrick. “Gov. Newsom Criticized Over Use of Gas Tax Money - Los Angeles Times.” Los Angeles Times, October 15, 2019. https://www.latimes.com/california/story/2019-10-15/california-gas-tax-revenues-all-sides-grumble-gavin-newsom-plans.
[16] Ibid.
[17] Lazo, Alejandro, and Alejandra Reyes-Velarde. “US Senate Blocks California’S Electric Car Mandate in Historic Vote.” CalMatters, May 22, 2025. https://calmatters.org/environment/2025/05/california-electric-car-mandate-senate-revoke-waiver/.
[18] California New Car Dealers Association. “California Auto Outlook.” California Auto Outlook, September 2025. https://www.cncda.org/wp-content/uploads/Cal-Covering-3Q-25.pdf.
[19] Veloz. “California EV Market Report - Veloz,” January 22, 2026. https://www.veloz.org/ev-market-report/.
[20] National Conference of State Legislatures, and Doug Shinkle. “Special Registration Fees for Electric and Hybrid Vehicles,” January 15, 2026. https://www.ncsl.org/transportation/special-registration-fees-for-electric-and-hybrid-vehicles#:~:text=Revenue%20from%20the%20registration%20fees,highway%20and%20bridge%20improvement%20projects.&text=Electric%20vehicle%20registration%20fee%20of%20$150.,N/A.&text=$120%20additional%20biennial%20fee%20for,to%20the%20existing%20transportation%20system.&text=$50%20annual%20registration%20fee%20for%20EVs.,into%20the%20state%20highway%20fund.&text=$200%20annual%20registration%20fee%20for%20EVs%20(2024%2D2027).&text=$274%20adjusted%20annually%20for%20inflation%20(2028%20and%20subsequent%20years).&text=$100%20adjusted%20annually%20for%20inflation%20(2028%20and%20subsequent%20years).
