Oregon Takes the Next Step in Moving Beyond the Gas Tax

Rep. Earl Blumenauer likes to say that Oregon was the first state to adopt a gas tax and it will be the first state to get rid of it. In 2006-2007, the state conducted a pilot study of alternative revenue collection methods, with an eye toward moving to a better system. This fall, they’ll do another pilot, fine-tuning their process for replacing the gas tax with a vehicle-miles-traveled fee.

Oregon's VMT fee can be collected through odometer readings, but the system works best if people use more high-tech means of tracking miles driven. Photo: Fun with Num3ers

A legislature-appointed task force looked into two dozen methods of funding transportation and settled on VMT as the best one. With electric cars and hybrids growing in popularity, especially in eco-minded Oregon, tax collections at the pump don’t bring in enough to maintain the state’s transportation infrastructure.

During the first pilot, people raised some familiar concerns about privacy. They didn’t like having a government-installed GPS receiver in their car, tracking their movements. As it turns out, a lot of the resistance can be overcome if people can choose their own technology from the marketplace. They can just use their own smart phone, GPS unit, or OnStar device. After all, we’re already wired to the teeth with technology that tracks our every move. We just need to let those devices calculate the miles we drive.

“The government will not be a provider of devices,” said James Whitty, who manages Oregon DOT’s Office of Innovative Partnerships and Alternative Funding. “We just won’t be. We can’t be. It stops the discussion of this. People don’t want the government to have anything to do with providing their technologies.”

Oregon DOT found that people were also more comfortable letting the private sector collect the data and process the payments.

While some would prefer a VMT fee based solely on odometer readings, that wouldn’t allow for dynamic pricing based on congestion and other conditions. But more importantly, especially when we’re talking about state tax collection, it doesn’t differentiate between miles driven in the state of Oregon, for which the driver owes taxes to Oregon, versus miles driven in Washington or California or Idaho.

Ironically, the people most vehement in their opposition to government tracking will have to deal with the government the most. For those who reject the technological approach — even with devices of their own choosing, and even with no transmitter of information out of the device – the state has been forced to come up with other options. But since they don’t involve private-sector technology, they won’t involve private-sector accounting, either.

One is based on odometer readings but would require drivers to pre-pay the miles. Odometers aren’t tamper-proof — but Whitty isn’t overly concerned with this possibility. “In tax-paying, not everybody is honest,” he said. “I think most people don’t want to cheat because they don’t want a criminal violation.” Under a VMT system it will likely be a crime to tamper with an onboard unit, too.

The odometer option has the downside of not differentiating between in-state and out-of-state miles, meaning people will pay more for this option. After all, if the use of technology is ruled out, the other instruments at the state’s command are far blunter. The other option they’ve come up with is a flat tax. And to make sure heavy drivers aren’t just taking that option to dodge paying their fair share, the tax has to be high.

“For people saying, ‘I want to buy my way out of it, I want to purchase unlimited miles so I don’t have to report anything’ — for those kinds of people, because they want to purchase unlimited miles, it has to be a high number,” said ODOT’s Whitty. The legislature will set that number, but he’s recommending that it be based on someone driving 40,000 miles a year, the 99th percentile of drivers. Multiply that by the 1.56 cents per mile the program will charge (in the pilot, anyway), and people will be paying $624 a year for the privilege of untracked travel.

Compare that to what they’d be paying if they paid per mile, aided by tracking devices. Based on average yearly driving totals and average fuel efficiency, an Oregonian now spends about $165 on state gas taxes (not including the additional $100 they pay for the federal gas tax). Under the VMT system, that person would pay $171.60 to Oregon — if every mile they drove in a year was within state boundaries. That’s not much of a jump at all from what they’re paying now, but it’s a far cry from the $624 they’d pay for the flat fee.

Another change from the 2006 study is that participants this time won’t pay the VMT fee at the pump. The Road User Fee Task Force turned away from pay-at-the-pump because “paying at the pump was not viable for electric and other non-gas powered vehicles.” Pilot participants will just pay at the end of the three-month study period. If implemented, the system will charge people monthly or quarterly.

Many Streetsblog readers don’t have their own cars and engage in some kind of occasional car-sharing. Whitty calmed my fears that I would be costing my car-loaning friends more money at the end of the year under a VMT system. “The mileage charge will probably be about a penny and a half per mile,” he said. “So for you to borrow the car for 100 miles a year, you’re talking about a dollar and a half. It’s just not that much. It’s like using their oil. ‘Forget about it.’”

After this pilot proves the system is workable, Whitty said, it’ll be up to the legislature to figure out where to begin. They might start using the VMT fee only for electric and hybrid cars that are currently not paying their fair share for the transportation infrastructure they benefit from. Or the legislature could include other very fuel efficient vehicles that get 40 or 50 miles per gallon.

“One thing I’m pretty sure about is they probably won’t include all vehicles – ever,” said Whitty. “Vehicles below the midpoint, about 20 miles per gallon, are already paying a load of gas tax. They pay the bulk of the gas tax because they’re consuming a lot of fuel. It just doesn’t make economic sense to include them in this.”

He said he hears from a lot of drivers of fuel-efficient cars that they’re willing to make the switch and pay more, but they don’t want people driving gas guzzlers to pay less. He said if this ended up being a financial break for drivers of inefficient vehicles, there would be a revolt.

The new pilot is scheduled to get underway in October or November, but the technology is still under development. Whitty said they have to be sure that the data message format from the various devices matches up and feeds into the servers the same way.

Other states have also expressed interest in making the switch. Whitty noted that Washington and Nevada are looking into it. The San Francisco metro area is studying the possibility. He said Western states seem most intrigued with the VMT idea, probably because they have almost no toll roads and are desperate for an adequate source of transportation revenue.