Charging Drivers by the Gallon vs. the Mile: An Equity Analysis by Geography and Income in California

This study used data from the 2017 National Household Travel Survey California Add-On sample to explore how replacing the current state vehicle fuel tax with a flat-per-mile-rate road-user charge (RUC) would affect costs for different kinds of households. We first estimated how household vehicle fuel efficiency, mileage, and fuel tax expenditures vary by geography (rural vs. urban) and by income. These findings were then used to estimate how much different types of households pay in the current per-gallon state fuel tax, what they would pay if the state were to replace fuel taxes with a flat-rate road-usage charge (RUC) that would generate revenues similar to the current state fuel tax (2.52¢ per mile driven), and the difference in household expenditures between the fuel tax and RUC. We find that rural households tend to drive more miles and own less fuel-efficient vehicles than urban ones, so they pay comparatively more in fuel tax and would pay more with the RUC as well. However, this rural/urban variation is less for the RUC than the fuel tax, so moving to a flat-rate RUC would redistribute some of the overall tax burden from rural households (that drive more miles in fuel-thirsty vehicles) to urban households (that drive fewer miles in more fuel-efficient vehicles). Transitioning from the fuel tax to RUC would also generally shift the fuel tax burden from lower-income to higher-income households, with one exception: expenditures would rise for low-income urban households. However, the variation in the tax incidence between the gas tax and RUC is quite modest, amounting to less than one dollar per week for both urban and rural households at all income levels.