The Gas Tax Versus a VMT Tax: Is ‘All of the Above’ an Option?

gas_tax.png(Chart: Oregon DOT)

The prospect of an eventual move away from the gas tax and towards a fee on vehicle miles traveled (VMT) has sparked consternation from some well-known bloggers this week, with Matt Yglesias asserting that "a VMT [tax] has no advantages whatsoever over higher gasoline taxes" and Andrew Samwick suggesting that declining fuel tax revenues mean that tax rates need to go even higher.

Leaving aside the political challenges facing a 10-cent gas tax increase, as suggested last year by the National Commission on Surface Transportation Infrastructure Financing (a similar panel of experts called for a gradual 40-cent hike in 2008), significant questions surround the gas tax’s viability as a long-term revenue raiser for infrastructure improvements — regardless of how high it goes.

Take the example of Oregon, the first state to levy a fuel tax in the year 1919. Now the state’s gas tax ranks 21st in the nation, but it began planning ahead for a VMT tax nine years ago after repeated attempts to raise fuel fees ran into political opposition. In its final report on the state’s "road user fee pilot program," the Oregon DOT noted that gas tax revenue couldn’t keep pace with the rise in fuel-efficient autos (see the above chart).

The state DOT’s report, written by James Whitty of the innovative partnerships office, took a candid look at the upsides and downsides of the gas tax (emphasis mine):

From the standpoint of tax policy, the gas tax is close to perfection. Nearly all the hallmarks of good tax policy can be found in Oregon’s efficient gas tax collection system. The gas tax has the inherent flaw, however, of lacking a direct nexus to road use. As a consequence of this flaw, it will become obvious in 10-15 years, if not earlier, that the gas tax has failed its originally intended purpose as a reliable source of revenue for the state’s road system.

That absence of a "direct nexus to road use" is a concept not easily understood by many Americans, especially drivers long inundated with misleading claims that the gas tax constitutes a user fee. As Ryan Avent has explained on this page, a user fee assumes that everyone on the road pays for the time they spend and the burden they place on it.

But while 25 gallons of taxed gas will last for an estimated 725 miles in a 2010 Ford Escape hybrid SUV (at a combined 29 miles per gallon), the lighter 2010 Ford Mustang (estimated at 19 miles per gallon) would go just 425 miles while paying the same amount of gas tax. The heavier car ends up putting more stress on the road while paying less for it. Is that an equitable system of maintaining the transportation network?

As Oregon discovered with its VMT pilot program, the gas tax and a mileage fee can be charged at the same time by tallying miles traveled at the pump based on a system of local zones, similar to what some areas use for taxicab charges. As the website Portland Transport showed in a pictorial post from 2007, congestion-pricing features could be added to customer receipts in a separate column from the VMT tax and gas fees.

So perhaps the question isn’t whether to sell the public on a viable VMT tax as a replacement for the gas tax, but how to make both policy tools work effectively in tandem.

As for the civil-liberties ramifications of VMT charging, it’s hard to see American drivers who have already embraced the Garmin GPS and the Onstar navigation system — which connects you with a live "advisor" — rejecting en masse one more device in their vehicles. Especially if that device helps fund transportation more equitably.

Late Update: The National Surface Transportation Infrastructure Financing Commission (the other panel of transport experts referenced above) made the case against indefinite reliance on the gas tax in its most recent report, noting that the indirect connection between fuel fees and road use could particularly impede smarter urban investments:

Because revenues from the gas tax are not related to where the vehicle is driven or the costs of providing the roads in that area, motor fuel taxes can also lead to less efficient system investment, particularly in urban areas with high congestion levels where direct user fees could pay for most or all of new project costs. As a result, efficiency in the choice and prioritization of projects depends on administrative and political choices that may not be closely related to “where” the revenues are raised. …
Reliance on motor fuel taxes generally provides a weak proxy for capturing the costs of environmental damage and other negative impacts such as contribution to congestion and system wear and tear.

  • KenF

    I like the idea of a VMT tax AND an indexed gas tax, so the gas tax can go up if consumption goes down.

  • McMia

    As an American who has in fact NOT embraced any type of vehicle tracker I most definitely would be against any kind of tracking device installed in my car.

    In fact if they are going to start installing them in all cars they better tie it in with the ignition system because I promise you the first thing I do after purchase will be to find and rip that garbage out.

    Tracking devices to pay taxes.

    Yes, that’s very American…

  • Eric Jaffa

    Garmin GPS and the Onstar navigation system are optional products offered by private companies.

    Not products mandated by the federal government.

    The gas tax is good.

    It has an incentive for fuel-efficient cars.

    There is no need for a VMT tax.

    The implication of this post that people can’t figure out that there is a connection between gas taxes and road use is absurd.

  • Royko

    I agree that the incentive for fuel-efficiency is a feature, not a bug. If we need more money, there are always ways to raise it, including raising the gas tax (or indexing it to avg miles driven and avg vehical weight). Not only that, but I’d imagine lighter cars cause less road wear, and taxing by mile isn’t exactly fair.

    As for civil liberties, there’s a big difference between choosing to install GPS from a private company that gets you cool navigation features vs being forced to allow the government to install something that will cost you money. And the only transportation funding that makes people happy is transportation funding that comes from somebody else.

  • sponson

    What if we had a tax that was directly proportional to the amount of contribution by the vehicle to global warming? Let’s see, how would this work? You would have to have an accurate calculation of how much fuel was burned, regardless of miles driven or not driven. Oh yeah, we already have that. The current tax system is not just adequate, it is superior to any of these proposals.

  • Turbulence

    When I use a Garmin GPS device, no one else but me gets access to where I traveled. That is a very big difference that you need to account for.

    Furthermore, I have not seen any explanation for how we could design a VMT box that is secure. I have degrees in electrical engineering and computer science so I know how to design all sorts of devices, but this is fundamentally very difficult. We’re talking about a device that needs to be attached to the vehicle, and transmit data from anywhere in the country, and has to be secure against user tampering, and has to anonymize users for their own protection. And it must be cheap. We don’t have good system design principles for solving those kinds of problems. That’s why systems like the xbox or various DRM systems always end up getting hacked. A hacked xbox will save you very little money compared to a hacked VMT counter.

  • Amanda

    Why can’t we just tie a fuel tax to annual or semi-annual odometer readings? Many states require annuel inspections that include an odometer check as it is. A sliding fee would be charged based on the use of the vehicle over the previous period. When you first register the car, you would set an estimated tax rate which would then be corrected at the next inspection.

  • RickD

    “But while 25 gallons of taxed gas will last for an estimated 725 miles in a 2010 Ford Escape hybrid SUV (at a combined 29 miles per gallon), the lighter 2010 Ford Mustang (estimated at 19 miles per gallon) would go just 425 miles while paying the same amount of gas tax. The heavier car ends up putting more stress on the road while paying less for it. Is that an equitable system of maintaining the transportation network?”

    Ordinarily, the heavier vehicle will have the worse gas mileage. Picking out unlikely circumstances seems like a poor way to base policy.

    Weird post.

  • Ddoubleday

    “As for the civil-liberties ramifications of VMT charging, it’s hard to see American drivers who have already embraced the Garmin GPS and the Onstar navigation system…rejecting en masse one more device in their vehicles.”

    No, that is not hard to imagine…not hard at all. This would be political suicide to whoever proposed it…and for once the uproar would be justified. Why on earth would you think it politically impossible to raise the gas tax yet think that a whole new tax that requires installation of equipment in your car will be welcomed?

  • sanly bowitz

    Tracking vehicles is inherently unfair. People use roads, not vehicles. An RFID chip should be implanted into each person to track all their movements on public roads. That way they pay their fair share whether driving, car pooling, or just hitching a ride. I foresee no problems with public acceptance of this. People already have mobile phones, right?

  • jim

    The political difficulty in raising the gas tax is rural legislators who understand that it would fall disproportionately on their constituents who tend to drive fuel-inefficient vehicles long distances. Talk of VMT is supposed to bring them along in that urban-dwellers would have to pay, too.

    But everyone commenting here is right. The idea is objectionable and, perhaps more important, unworkable. It may not be that hard to build the requisite measuring capabilities into new cars, but retrofitting old ones, particularly old ones no longer made, is likely to be hard and not that cheap. Who pays? As McMia points out, above, it will have to be hard to disable.

    @Amanda, odometers are notoriously easy to change. Or simply to be made to stop working.

  • Harry Tuttle

    What RickD said.

    You’re comparing a high performance sports-car with a hybrid people-carrier. And it’s a crap comparison; The difference in weight is actually pretty minimal. Like 150 Lbs. Not nearly enough to offset the damage the much greater power and braking ability of the Mustang will inflict on the road. And then there’s the difference in emissions …

    How ’bout we compare apples to apples? Say an Escape Hybrid (3650 Lbs, 29 MPG) and a Toyota Yaris (2400 Lbs, 38 MPG). Or a Mustang (3500 Lbs, 19 MPG) and a Mazda Miata (2500 Lbs, 28 MPG).

  • Galls

    I fully support a VMT, the gas tax is simply another way of taking money from the cities and using it to fund interstate construction in the sticks.

    Since the gas tax is used for the sole purpose of funding limited access interstate highways, just toll them all based on weight, distance and place. No need for tracking devices, or complex odometer schemes, just %100 user based fees.

  • Galls

    One more thing:

    A gas tax has its place, but that is as a integral part of taxing externalities, as in the negative consequences that come from the exhaust pipe. Not as a tool to build or maintain sprawl.

  • RepubAnon

    Will it be called the Dick Cheney Vehicle Tracking and user fee act “for the children and to protect us against islamofascistcommiegreenpolice”?

  • The Oracle

    This wouldn’t be so bad if not for it having all been orchestrated, starting about twenty to thirty years ago, when some right-wing privatizers decided that everything public in our democracy had to be privatized, for their benefit, for their profit.

    These privateers, er, privatizers, therefore, blocked any attempt to raise the gas tax, even if by just a little, even when gas was around a $1.00 a gallon, to pay for new public-funded roads and maintain those already in existence. Thus, the gas tax has remained the same for almost two decades even as our population grew and more cars hit the roads.

    But off of what were these privateers, er, privatizers planning to make so much money? Toll roads. For profit. For their profit. Around my town, these corporate privateers, er, privatizers have even gone so far as to propose turning current public roads (and the right-of-way purchased by the citizens) into toll roads, without any reimbursement to the citizenry for this corporate for-profit rape of this public resource.

    I’m not fooled. Public schools underfunded to make way for for-profit charter schools. The U.S. military downsized to make way for for-profit contractors and sub-contractors taking over jobs public-funded members of our military used to do themselves. We saw huge amounts of this costly privatization scam during the Bush/Cheney years, a tsunami of outsourcing public jobs to for-profit contractors and sub-contractors (primarily Republican owned) through the extensive use by Bush/Cheney of federal-law-violating no-bid contracts.

    So, now someone is proposing this VMT. Why? For what purpose? Versus raising the gas tax by a few cents nationwide? If more restrictions were placed on on-line oil futures trading, we’d probably actually see a net gain, with gasoline costing less, easily making up for the few cent increase in the gas tax.

    I agree with McMia above. Just what our liberal democracy needs…more surveillance. Oh, wait, such surveillance usually is the hallmark of one right-wing totalitarian police state after another throughout history. Gotta keep an eye on those “loyal” subjects, don’t you know, who might get restless at having their democracy stolen from them by a bunch of for-profit authoritarian totalitarian right-wing control freaks. Yep. Yep. Like what has happened to America today.

  • The Oracle

    BTW, there’d probably be much less reliance on private transportation versus public transportation today if not for what some deceitful corporatists did to public transportation shortly after World War II.

    Several companies banded together (an oil company, tire company, battery company, automobile company, etc), established a dummy corporation, which proceeded to purchase trolley lines around the U.S., with the intent of crippling and eventually destroying them all (trolleys were even burned), forcing U.S. consumers into buying their product for their private means of getting around and replacing city trolley lines with bus routes. Profit. Profit. Profit.

    When their conspiracy was uncovered by Congress in the early 1950s, each individual was fined a whopping $1.00 and each company involved a whopping $5,000. Wow, that’ll show them. These type of conservatives will be the death of America. Privatize everything they can get their greedy hands on for their profit, and the public be damned. That’s their idea of a “free market economy.” And a subservient citizenry MUST be monitored…to make certain no one gets any crazy democratic, liberal ideas in their head.

  • Woodrow L. Goode, IV

    Let me make sure I understand this: I have a car that gets 37 highway miles a gallon, and I make a 70-mile round trip (using the Ohio Turnpike for 60 of those miles) every day.

    But you’d like to tax me more than my co-worker– who drives 30 miles per day in a Hummer H2 (12 MPG). And you think this is more equitable?

    Obviously a hyrbid puts more wear and tear on roads, while using less gas. Since there were a whopping 288,000 hybrids registered in the US in 2008 (out of 150 million autos), this seems (to be kind) a little premature.

  • Gubulgaria

    Obviously the US public aren’t going to accept the VMT trackers, as there is no advantage to the VMT over gas tax (in fact it’s worse in several ways), and so it looks, prima facie, like some sort of conspiracy – if there’s no advantage, why does everyone need a tracker installed? Must be a hidden agenda.

    I’m not saying there is a hidden agenda, I’m just saying that opponents of the tax will claim that, and the US public will believe them.

  • kc

    it’s hard to see American drivers who have already embraced the Garmin GPS and the Onstar navigation system — which connects you with a live “advisor” — rejecting en masse one more device in their vehicles.

    Wanna bet?

  • There are options to making our transportation funding more equitable that don’t involve civil liberties concerns. How about a gas tax that scales based on vehicular weight? How about a gas tax that is indexed by region? (Urban gas stations charge different taxes than suburban or rural stations, based on average distance travelled in that area.) Odometer readings are also a great idea. I also support automated tolling on limited-access highways and at key city choke points (LA river bridges, NYC bridges, etc.). Just because a GPS system in every car is a better technical solution doesn’t mean it’s a better political one, and I think you’d have civil libertarians on both the right and the left rioting over it.

  • jim

    “Just because a GPS system in every car is a better technical solution doesn’t mean it’s a better political one.”

    It is very frustrating to engineers to read things like this. I blame the RAND study which was utterly irresponsible. It waved its hands and talked of a box which would track a vehicle’s movements by GPS as though such a thing existed, or as though that were an adequate description to get such a thing built. People assume a magic GPS box which can implement a VMT tax and then proceed to discuss the civil liberties issues that it raises.

    There is no such box. not only has no such box been built, no such box has been designed. Not only has no such box been designed, but no such box has been specified. It tracks by GPS. What does it do if it has acquired only two satellites? Only one? None at all? Is the GPS antenna internal or external? How is it powered? How does it interact with the rest of the car? What degree of tamper-proofing is required? These questions (and many more) need to be answered before anyone can design such a box. Some answers are more expensive than others.

    Answers are double-edged. A particular specification may be cheaper to build, but more expensive to retrofit into existing cars. Recognize that poorer people generally have older cars into which retrofitting any box is likely to be more expensive; a box which is picky about how it engages with the car runs the price up yet more. Recognize, too, that there are a quarter of a billion cars out there that would need retrofitting.

    There are massive engineering and implementation issues with a VMT tax. Not talking about them doesn’t make them go away.