Taxing Driving by the Mile

A vehicle mileage tax can bring economic sensibility to our roads. It can also raise privacy concerns. Oregon is playing with several alternatives across the range of privacy options.

A frequent criticism of transit is that fare box revenues are far less than the operating costs. The charge is true. Twenty percent of operating costs is the goal for fare box revenues, but ten to fifteen percent is the more frequent reality. Those who oppose transit and the land-use paradigm that it represents often decry this as a "subsidy". Perhaps it’s a fair description.

But the description ignores that automobile use receives a similar "subsidy". Other than the gasoline tax, which is both inadequate and poorly apportioned, we don’t pay to use public roads.

Ah-hah, some argue, we pay for our roads through our property taxes. Well, not really. Even if we skip over the fact that property taxes support roads in the same way that income taxes support transit, and therefore either both are the beneficiaries of subsidies or neither are, a homeowner pays the same property tax bill whether he drives 1,000 or 100,000 miles per year. There is no supplemental charge for the extra 99,000 miles of road use.

But some will now argue that the gasoline tax is how we pay for the extra miles.  There is some truth to the argument, but less than one might think. The gasoline tax is a proxy for road usage, but a poor one. The federal Highway Trust Fund has been running on empty for years, forcing Congress to loan money from the general fund. And even then, the Trust Fund is only used for road construction and maintenance. The other costs of gasoline use, particularly the geopolitical and environmental costs, are borne elsewhere in the federal budget.

One could argue for a much higher gasoline tax. Indeed I’ve done so. But the gas tax isn’t well apportioned. A car getting 45 miles per gallon will pay only one-third the gas tax per mile compared to a car getting 15 miles per gallon. (As a Prius driver, I’m not really complaining about it, but I’ll acknowledge the inequity.) It’s an appropriate tax for the geopolitical and environmental costs of petroleum, to which its collections are not directed, and a flawed tax for road construction and maintenance, to which its collections are directed. Don’t you love federal tax policy?

For these reasons, many argue for a new form of taxation, a vehicle mileage tax (VMT). Indeed, when we talk transportation issues at Petaluma Urban Chat, the VMT is often noted as a key omission in the economics of transportation.

At its simplest, a VMT could be imposed by having an annual odometer check with a payment assessed for mileage traveled during the year.

But if a VMT was implemented using the upper end of technology, it could be a remarkably useful tool. If every car had a sensor that allowed the movements of the car to be continually tracked, different mileage charges could be applied to different times of day. Driving south on 101 toward San Rafael at 8am Monday morning would have a different charge than driving the same stretch of freeway at 11pm Monday evening.

And if vehicle location is collected on a short enough time increment, speed could be calculated. If you travel 1.3 miles on 101 in 60 seconds, you can expect a speeding ticket for going 78 miles per hour. The automated enforcement would immediately slow traffic, resulting in gas conservation and freeing police departments for other uses. 

In an application of particular interest to me, parking could also be monitored. Spend three hours in a two-hour zone? The fine could be automatically added to your bill. No meter attendant required. Park every day at the far end of the Safeway parking lot while carpooling to a job in the East Bay? You’d be charged for the use of the parking space, with those funds passed along to Safeway. (Note: Carpooling is a good thing. Hopefully, the charge would be fair to Safeway while not enough to discourage carpooling.)

But there’s a dark side to a VMT. Many people sense a "creepiness" factor in having their car being continually tracked. I’m perhaps not as bothered as some about it, but I can appreciate the concern. I wouldn’t be pleased about a technocrat in Sacramento knowing if I made frequent 1am runs to a liquor store.  Or if my car spent the night outside my girlfriend’s house whenever my wife was out of town. (Note: Both examples are extremely hypothetical.)

Atlantic Cities has written about the creepiness factor. Emily Badger acknowledges the concern and the need to balance improved equity in road use fees versus privacy invasion. Unfortunately, Badger doesn’t come to any helpful conclusions, winding down with the thought that perhaps churches or schools can facilitate the dialogue. It was an interesting thought, but doesn’t seem to lead anywhere.

Against this background, it’s interesting to note that Oregon is proceeding with actual road tests of a VMT. They’ve identified a range of VMT implementation options from strong information/low privacy to weak information/high privacy. At this time, they’re only testing the implementation with volunteers. But the results will be available to the state legislature which will decide on the future of a VMT.

It’ll be an interesting experiment to follow. Because if an effective VMT leads to a higher percentage of road costs being fairly collected from drivers, it could lead to higher transit fare box collections.

As a closing note, some may ask what would happen to current property taxes and income taxes if a VMT supplants some of the needs now covered by the first two. If our taxes were already covering the annual costs of government and if we didn’t have a deficit, property taxes and income taxes should decrease.  But as we have deficits and unmet governmental needs, the reallocation of taxes would be a legislative decision. And I never try to predict those.

As always, your questions or comments will be appreciated. Please comment below or email me. And thanks for reading. - Dave Alden (davealden53@comcast.net)

Dave Alden is a Registered Civil Engineer. He has worked on energy and land-use projects in California, Oregon, and Washington. He was also the president of a minor league baseball team for two seasons. He lives on the west side of Petaluma with his wife and three dogs. The blog that he writes can be found at http://northbaydesignkit.blogspot.com. He can also be followed on Facebook, LinkedIn, and Twitter.

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Steven Kirk February 05, 2013 at 12:05 AM
Interesting new blog post. I've long been a proponent of an increased gas tax, but now thinking a vehicle mileage tax sounds more equitable and a better long-range method of obtaining the funds needed to cover the costs of transport. (Any increases in gas tax will encourage use of vehicles with better gas mileage which quickly diminishes additional funds flowing into the coffers. From a funding standpoint, the short-term gains set up long-term shortfalls.) With driverless cars suddenly a likely reality sooner than anyone could have anticipated only a few short years ago, a VMT seems even more logical. It will be interesting to see how Oregon's initiative fares.
Dave Alden February 05, 2013 at 02:40 AM
Steve, thanks for the comment. I still like a gas tax, and think it should be higher, but I believe those revenues should go toward the environmental and geopolitical costs of petroleum. The VMT could then go toward road expenses, including perhaps predominantly maintenance. I'm curious about your reference to driverless cars. What impact do you think that technology would have on a VMT?
Wire February 06, 2013 at 03:48 AM
http://www.youtube.com/watch?v=sES6_OXPwOU Don't forget the Global Warming. I want the greed to stop pulling out gas tax money for road repair to mass transit systems, any mass transient will never pay for it's self. I have been driving a car that gets 40 to 50 MPG made in 1986 in Germany.
Dave Alden February 21, 2013 at 12:36 AM
As our transportation systems are currently organized, mass transit will never fully fund itself. Neither will the use of private automobiles. It's only fair to mention both together. Yes, there were cars that achieved 40 to 50 mpg long before the 21st century. But they failed to comply with contemporary emission or safety standards, both of which are important public safety issues.
Wire February 21, 2013 at 01:54 AM
The state would love to get mine off the road as a 86 diesel turbo, but look the SMART train is diesel too but it's clean diesel why not natural gas? Seattle looking at taxing bikes then raise the fuel tax ten cents! After their gun control.


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