Sick of the gas tax? A mileage-based tax might be a better option.

August 24, 2012

For decades, Congress and the states have largely funded roads, highways and bridges through a tax on gasoline. And the system has worked reasonably well. But there are just a few hitches. For one, the tax is politically difficult to hike, even when infrastructure starts wearing down. And second, as cars get more fuel-efficient, gas-tax revenue starts plummeting, even though people are still using the roads.


Watching the odometer. (Gene Weingarten/The Washington Post)

So, in recent years, some states and cities have started experimenting with an alternative — the "vehicle miles traveled tax." The idea here is that cars and trucks would pay a small fee for each mile they drove. That way, even hybrids and electric cars would chip in their share for using the roads. (After all, an all-electric SUV tears up the road just as much as a gas-guzzling SUV does.) Oregon, which is home to a large number of eco-friendly vehicles, has begun testing the proposa, and officials in San Francisco are now interested in studying the concept. It's a way of making sure that transportation revenue doesn't drop too far in the years ahead.

But the VMT tax also comes with a bunch of problems and complications. Government officials have to track the number of miles that people are actually driving in order to charge them. Not only can that create logistical headaches, but it's bound to raise privacy concerns. So it's interesting to see that, as Nate Berg reports over at Atlantic Cities, some recent research suggests that these problems are addressable:

A recent national field study of roughly 2,650 drivers, conducted by the University of Iowa [PDF], [found that a tracking system] successfully captured about 92 percent of miles driven. ... Mileage data can be captured via GPS or, if tracking exact vehicle location makes you wary, via a non-GPS odometer system that leverages standard car technology.

During a transition phase a VMT system can be integrated with existing fuel pumps to make sure drivers who pay mileage fees don't also pay a gas tax. Critically, VMT can be aggregated by zones — to separate use of rural and urban roads, for instance — allowing for a more equitable user system in which the busiest roads receive the most money.

Berg also reports that, in early trials, drivers are far less resistant to the system than one might expect. "In the Iowa study," Berg writes, "roughly 41 percent of participants expressed a positive feeling toward a VMT fee before the trial, and roughly 70 percent expressed a positive feeling after it." That's surprising insofar as conventional wisdom holds that this is a politically toxic idea. When Transportation Secretary Ray Lahood floated the idea of a VMT tax back in 2009, the White House immediately swatted it down.

The Congressional Budget Office delved into the details of the VMT tax in this 2011 report (pdf). The CBO noted that such taxes could prove far more efficient at funding transportation than existing gas taxes, although a lot would depend on how policymakers actually wanted to levy the fees. Should heavier trucks get charged more than lighter cars? Should drivers get charged more if they're driving during peak hours, in order to reduce congestion? Would rural drivers get charged less, on account of the fact that they can't easily avoid driving long distances? The details are where things get tricky.

Meanwhile, the CBO notes, a mileage-based tax has at least one drawback — it decreases incentives for people to buy more fuel-efficient vehicles. So if policymakers are trying to reduce gasoline and oil use, then a direct gas tax is a more straightforward way to go. But if gas-tax revenues start declining, and Congress or state governments need an alternate way to bankroll their roads and bridges, then a VMT tax could be an option worth considering.

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Sarah Kliff · August 24, 2012