Michigan Tests Pay-Per-Mile System As EVs Cut Into Gas Tax Revenue

Michigan is spending up to $7.65 million on a pilot program to test a mileage-based alternative to its gas tax.

The pilot will launch in February 2027, run for six months, and enroll 1,000 volunteers, Jennifer Roberts, the road usage charge (RUC) lead at consultant CDM Smith, told FOX 2 Detroit. Democratic Michigan Gov. Gretchen Whitmer proposed the program, and lawmakers approved the spending cap in the 2025 budget, according to the public act.

Whitmer leaves office Jan. 1, a month before the pilot is set to begin.

The Michigan Department of Transportation (MDOT) states on its website that participation will be voluntary and “no changes are planned at this time.” The department adds that lawmakers would have to pass new legislation before the state could impose a permanent mileage charge.

James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, told the Daily Caller News Foundation that moving from taxpayer financing to direct user fees would be better for state residents, but only if the charge replaces the fuel tax.

“Some people within the road lobby have wanted it to be an additional revenue flow rather than a replacement,” Hohman said. “But it’s not a user fee if it’s just an extra charge, and it would not improve efficiency and fairness if it’s just another way to collect revenue.”

A mileage charge would apply to vehicles registered in Michigan, and “one of the difficulties” of the model is charging out-of-state drivers and people who regularly cross state or international borders, according to FOX 2 Detroit. Out-of-state drivers currently pay Michigan’s fuel tax when they buy gasoline in the state.

The MDOT study “does model and pitch it as a replacement for fuel taxes,” Hohman told the DCNF. Charging out-of-state drivers is “something they’d like to do,” but the Legislature would have to decide how, Hohman said.

MDOT and Whitmer’s office did not immediately respond to the DCNF’s requests for comment.

The State Administrative Board approved a $6,307,178 contract with CDM Smith on June 2 that runs through Dec. 31, 2027, according to the board’s minutes. That works out to more than $6,000 per pilot participant. The contract covers project management, procurement, statewide public outreach and “legislative engagement” as well as the pilot itself, and the board said the pilot will explore the “technical feasibility, political palatability, and public acceptance factors needed to make RUC viable for Michigan.”

John Peracchio, a member of the advisory committee designing the pilot and an appointee to the State Transportation Commission, said in a Feb. 4 interview with WDIV that one option is to “leverage the embedded telematics” already built into most new and used vehicles. “GPS can get you within two meters reliably today,” Peracchio said. Another option, Peracchio said, is “to leverage a smart device like an iPhone, and to marry that data up with information about your vehicle.”

The committee meets next on Sept. 28 in Lansing, according to MDOT’s events page.

The pilot will cover passenger vehicles only and will test four ways of counting miles: odometer readings, in-vehicle telematics, a plug-in device or a smartphone app, according to the minutes of MDOT’s Aug. 24 technical advisory committee meeting. The committee will grade the pilot on data security and privacy among other criteria, the minutes state.

MDOT’s own 2024 survey of 19,160 Michigan residents found 44% were “not confident that it will result in improved roads,” and more than 30% worried about data privacy and how their miles would be counted, according to the department’s report on the results. 17% of respondents said that they would refuse to provide mileage data, and only 25% called a mileage charge the fairest way to pay for roads, behind General Fund dollars at 31%, the report states.

Peracchio said a per-mile system “is analogous to tolling,” though he resists “the ugly gantries, toll tags, tag readers and video capture.”

He also said the state could not finish both the study and the pilot by the Dec. 31, 2026, deadline in the law and would ask the Legislature for more time. A statewide system would take far longer than the pilot, he said. “If we started tomorrow, it would probably take us a decade to roll this out effectively,” he said. Asked what drivers would pay per mile, he said, “We’re nowhere near figuring that out.”

“It’s going to kill me. I put on a lot of miles,” Aaron Wesener, a mid-Michigan resident who drives long distances for work and his children’s schooling, told WNEM.

CDM Smith, the contractor running Michigan’s pilot, calls the rural objection a “myth” on its website and says rural drivers could pay less under a flat mileage charge that replaces the fuel tax because they tend to own older, less efficient trucks.

Peracchio said the study would give lawmakers options on whether a rural driver “should be charged the same because I have to drive farther to get to work.” He said lower-income drivers “should perhaps pay less.” The state could qualify people for lower rates the way it does for government benefits, he said.

Electric vehicles cost Michigan roads approximately $50 million in expected gas tax revenue from 2019 through 2021, according to Bridge Michigan. The annual shortfall could reach $95 million by 2030 if electric vehicles make up 25% of new sales, according to the Anderson Economic Group study for the County Road Association of Michigan that Bridge reported on in January 2023.

Electric vehicles made up 1.2% of vehicles on Michigan roads, a former Michigan State Police officer told the committee during public comment, according to the minutes. Michigan already charges electric vehicle owners a $267 annual fee on top of regular registration and plug-in hybrid owners $113, among the highest such fees in the nation, according to FOX 2 Detroit.

The study comes as the national average price of regular gasoline stood at $4.22 per gallon Wednesday, up from $3.19 a year earlier, according to AAA. Brent crude topped $100 a barrel Wednesday for the first time since July as the Iran war keeps the Strait of Hormuz largely closed to tanker traffic, according to ABC News.

Michigan raised its motor fuel tax from 31 cents to 52.4 cents per gallon on Jan. 1 while eliminating the 6% sales tax on fuel, a change the Treasury Department calls a swap rather than a price increase.

A House bill introduced in March, HB 5765 from Republican Rep. Jennifer Wortz of Quincy, would apply only to electric and hybrid vehicles and let owners choose between a flat annual tax and a per-mile tax of about 2.1 cents tracked by odometer, according to the bill text. The bill would count every mile as driven in Michigan unless the owner files paperwork proving otherwise. It has cosponsors from both parties and is tied to a companion bill, HB 5766. The Legislature’s website shows no reported action since the House referred it to the Government Operations Committee on March 19.

The per-mile charge becomes mandatory for electric vehicles in 2028 and is expected to cover all light-duty vehicles by 2033, the department said. Peracchio told WDIV the odometer model “really works well in a place like Hawaii,” but Michigan has “a land bridge” and must sort out reciprocity with other states.

Electric vehicle owners in Hawaii have paid either $8 per 1,000 miles, capped at $50, or a flat $50 since July 2025, with odometers photographed during annual safety inspections, according to the state’s Department of Transportation.