Taxing Travel: California’s Proposed Per-Mile Driving Tax

On January 29, 2026, California’s State Assembly—the first chamber of its legislature—passed AB 1421. This bill, which passed along partisan lines, orders further study towards potentially replacing California’s gas tax with a “driving tax” of up to 9 cents per mile. This article explains the facts behind the proposal, the reason it’s being considered, and the potential implications for California residents. 

What AB 1421 Actually Proposes

First and foremost, it is very important to note that AB 1421 does not enact a new per-mile driving tax of any sort. After it passed the State Assembly, many internet users were quick to spread misinformation about AB 1421. 

To be precise, AB 1421 actually orders the CA Transportation Commission to compile existing research on mileage based taxation—taxes based on the amount of miles one drives in a given period. Once the research is compiled, the Commission must consult various agencies and submit a report to the legislature by January 1, 2027. 

Nevertheless, some of the apprehension about AB 1421 may be justified. The bill does leave the door open to the potential implementation of a mileage-based tax. However, the actual enactment of such a tax would require a separate bill, and would likely have to wait until after the Transportation Commission submits its report.

The History of the Gas Tax

To understand why the gas tax is being replaced, it is important to understand where it came from and why it was enacted in the first place. Interestingly, California’s gas tax is older than one would expect. The state passed its first gas tax in 1923 in order to fund the state’s developing highway system. 

Since then, the gas tax has been modified on various occasions. The most recent of these modifications was SB-1 in 2017, which incorporates annual adjustments to ensure the tax keeps up with inflation. The incentives behind the tax have also changed over time, moving from highway construction to road maintenance, and finally to emission reduction. 

Over the years, California legislators have largely supported the gas tax for a variety of reasons. First of all, since the tax is ostensibly tied to road use, it compensates the government for the maintenance it must pay for when the roads are more frequently used. Secondly, the tax imposes a steeper cost on gasoline users, incentivizing the use of Electric Vehicles (EVs) and hybrids, or even alternative modes of transportation like biking, walking, or public transit.

The gas tax has also been historically supported because of its relatively low collection cost due to California’s “prepaid” gas tax, where the tax is collected directly from suppliers (i.e., the tax is collected before the gas is sold to the consumer). 

So Why Switch?

In recent years the gas tax has become a less effective tool for revenue-gathering. Nonprofit CalMatters predicted a $6 billion drop in revenues from the gas tax in the coming years. This is largely due to the fact that, as technology catches up with climate goals and EV/hybrid use is more commonplace, the burden of the gas tax is falling unevenly onto gas-car users, and therefore has become detached from actual road-use. 

The bill’s author, CA State Assemblywoman Lori Wilson, emphasized a need to “ensure all motorists pay their fair share, while protecting affordability and privacy.” In the next decade, the CA Transportation Commission estimates that fuel efficiency and EV use will reduce revenue from the gas tax by around $31 billion. Furthermore, users of EVs and hybrids are generally at a higher income level. Those with more ability to pay are able to dodge the gas tax by simply not using gas. 

What This Would Mean for Californians

Interestingly, no exact numbers have been released for the proposed tax. The study by the CA Transportation Commission will cost taxpayer money, but nowhere near the amount that would be gathered through a new tax. 

Currently, Californians pay between 1-3¢ per mile they drive (depending on their MPG). As of 2025, the per-gallon tax is 61.2¢. In total, including state and federal taxes, Californians pay nearly 90¢ per gallon—among the highest rates in the entire country.

Although this per-mile tax is, in a general sense, aimed at affordability, the burden will still fall unevenly on communities with less ability to pay. Realistically, a per-mile tax would have a disproportionate impact on commuters, large families, and other demographics that rely on long-distance driving, and are living at the margin of their budget.

Image Source: Luskin School of Public Affairs