Rethinking Road Funding: The Rise of Pay-Per-Mile Tax for Electric Cars

1. The Changing Landscape of Road Funding

For decades, fuel taxes have been the cornerstone of road infrastructure funding. Drivers paid per gallon of gasoline or diesel, and those revenues maintained highways, bridges, and local roads. However, as electric vehicles (EVs) gain popularity, that system is losing traction. EV owners contribute little to no fuel tax, leading to concerns about declining transportation budgets.

Governments are now considering a pay-per-mile tax — a model that charges drivers based on how far they travel rather than how much fuel they burn. The idea is simple: every vehicle uses the road, so every driver should contribute fairly to its upkeep.

2. Why the Shift Is Necessary

The growth of the electric vehicle market has brought undeniable environmental benefits. EVs help reduce emissions and dependency on fossil fuels. Yet, they also challenge traditional revenue systems designed around fuel consumption.

In many countries, fuel tax makes up a significant portion of transportation budgets. As EV adoption increases, those funds are shrinking. For example, in the United States, the Congressional Budget Office projects billions in lost highway revenue over the next decade. Without new funding mechanisms, maintaining and upgrading infrastructure could become increasingly difficult.

The pay-per-mile approach, sometimes called a Vehicle Miles Traveled (VMT) tax, is designed to fill that gap. It links road use directly to payment, creating a sustainable funding model that aligns with modern vehicle technology.

3. How Pay-Per-Mile Systems Work

A pay-per-mile tax calculates charges based on the number of miles driven. Technology enables several implementation methods:

Odometer Reporting: Drivers periodically submit mileage readings during registration or maintenance checks.

GPS-Based Tracking: A device records the vehicle’s distance and location, ensuring accuracy while distinguishing between in-state and out-of-state travel.

Telematics Integration: Some modern cars can automatically transmit mileage data securely through built-in systems.

To address privacy concerns, most pilot programs offer multiple options. Drivers can choose between reporting mileage manually or using automated systems that anonymize data. The goal is to balance fairness, simplicity, and privacy.

4. Examples from Early Adopters

Several regions have already begun experimenting with pay-per-mile systems.

Oregon’s OReGO program is one of the most advanced, allowing participants to pay a per-mile fee instead of traditional fuel tax. The system uses certified account managers to track mileage and process payments.

Utah and Virginia have launched similar programs, with voluntary enrollment for electric and hybrid vehicle owners.

In the United Kingdom, policy discussions are gaining momentum as fuel tax revenues decline alongside rising EV sales.

These trials aim to test technology, administrative efficiency, and public acceptance before broader implementation.

5. Advantages of the Pay-Per-Mile Approach

The concept brings several benefits beyond revenue replacement.

First, it promotes equity among drivers. While EV owners currently pay less toward road maintenance, they use the same infrastructure as fuel-powered vehicles. A mileage-based system ensures all drivers contribute proportionally to their road usage.

Second, it encourages efficient road use. If implemented thoughtfully, per-mile fees can help reduce unnecessary trips, potentially lowering congestion and emissions.

Third, it provides long-term stability. Unlike fuel taxes, which fluctuate with energy transitions, a distance-based model adapts to any propulsion technology — gasoline, electricity, or hydrogen.

6. Concerns and Challenges

Despite its potential, pay-per-mile taxation faces practical and ethical challenges.

Privacy remains the most discussed issue. Many drivers are wary of government access to location data. Ensuring that systems anonymize or aggregate information is critical to public trust.

Administrative complexity is another concern. Implementing mileage reporting, data management, and billing systems requires significant investment. Policymakers must ensure that setup costs do not outweigh benefits.

Finally, equity between rural and urban drivers needs careful consideration. Rural residents often travel longer distances for work or services. Without adjustments or exemptions, they could bear a heavier financial burden.

7. Policy Considerations for a Fair Transition

To succeed, pay-per-mile systems must be transparent, equitable, and adaptable. Policymakers could consider:

Graduated rates based on vehicle type, emissions, or location.

Privacy safeguards that separate personal data from billing systems.

Pilot programs to test public acceptance before national rollout.

Public education campaigns to explain the rationale and benefits.

In many cases, a hybrid approach — combining low per-mile charges with existing registration fees — may offer a smooth transition while systems mature.

8. Looking Ahead

As the world shifts toward electric and connected mobility, funding models must evolve too. A pay-per-mile tax is not a penalty for EV owners; it’s an attempt to create a sustainable, fair, and technology-neutral framework for road maintenance.

While challenges remain, early pilots suggest that with clear communication and privacy protections, public acceptance can grow. The conversation is ultimately about responsibility and fairness — ensuring that every driver, regardless of their vehicle’s energy source, helps maintain the shared infrastructure that connects us all.