Even If the Trust Fund Were Flush, We Should Still Switch to a VMT Fee

By now the problems with the gas tax are well reported. Revenues from the tax have been declining for years because of improved fuel economy and alternative-fuel vehicles. The result is a growing gap between the money needed to maintain and improve our transportation system and the money available in the Highway Trust Fund.

A dashboard-mounted transponder like this can record mileage. Photo: ##http://minnesota.publicradio.org/display/web/2007/01/02/mileagetax/##ODOT##

The federal gas tax has not been raised in 20 years. Instead, Congress has relied on repeated transfers from the general fund to prevent the Highway Trust Fund from running out of money.

Transportation experts agree that adopting a more sustainable method of funding makes sense. One option under consideration is a user fee based on vehicle miles traveled (VMT). Oregon is testing out this system with an eye toward replacing the gas tax.

A VMT fee would charge drivers according to the number of miles they drive, rather than the amount of gasoline they consume. The fee could also be varied based on time of day, location or vehicle type.

If the charge is set appropriately, it could provide sufficient revenues to properly invest in the nation’s transportation system. But as important as that is, revenue isn’t the only reason to make the switch.

Here are five other reasons why it makes sense to adopt a mileage-based system.

The current system lacks fairness.

Drivers of hybrid vehicles and other fuel-efficient cars pay less in gas taxes than drivers of other cars for the same number of road miles. A mileage-based user fee system restores the link between road use and payment for all drivers.

The gas tax has also become regressive since it is likely that higher-income drivers are more able to afford the more expensive hybrid (or 20 years from now, electric) vehicles.

Drivers can also often fill up their gas tanks in one jurisdiction and do most of their driving somewhere else. This means that many drivers aren’t paying for the upkeep of the roads on which they drive. A fee based on road mileage would ensure drivers pay for road use no matter where they drive.

It could ease traffic congestion.

The per-mile charge can also be varied according to time of day or location, leading to the efficient use of our road network and less traffic congestion. According to the latest urban mobility report by the Texas Transportation Institute, U.S. drivers spent an unnecessary 5.5 billion hours behind the wheel and purchased an extra 2.9 billion gallons of fuel due to congestion in 2011. Lost worker productivity and other indirect costs add to the price tag of congestion.

Congestion pricing has been used successfully in London, Milan, Singapore, and Stockholm. Since 1998, when electronic congestion pricing was introduced in Singapore, the number of vehicles entering the city’s central business district has declined from 271,000 to 206,000 per day, speeding up the flow of traffic. London saw dramatic increases in the use of public transit during rush hour since congestion pricing was introduced there in 2003 [PDF].

It will be a game-changer for the environment.

Evidence shows that the cost of driving correlates to how much people drive and what kind of vehicles they buy. A 2008 CBO study showed that drivers drove about 0.7 percent less for every 50 cent increase in gas prices [PDF]. The number of light trucks sold also fell by more than half a percent per 50 cent gas price increase.

It is fair to assume that increasing the cost of road usage by adding a separate bill for per-mile vehicle charges will result in further reductions in vehicle trips. As drivers become more aware of the true costs of driving, their overall demand for petroleum will decline, reducing vehicle emissions and moving us closer to energy independence and a cleaner environment.

It is consistent with modern technology.

The way we pay for our road network hasn’t kept pace with advances in technology. The current system involves a complex shifting of the costs of the tax along the gasoline supply chain, from refiners and wholesalers to retailers and consumers.

Since the creation of the gas tax in the 1950s to fund the creation of the interstate highway system, there have been a number of technological breakthroughs that make this system seem outdated. For example, the development of electronic tolling now allows drivers to pay for road use via transponders placed on their windshields — similar technology to that employed in VMT pilot programs.

Rob Atkinson, president of the Information Technology and Innovation Foundation, noted that we have come to the point where drivers can be charged for the use of roads the same way customers are charged for utilities.

“Technology now enables vehicles to pay based on where, when and how far they drive,” he said.

It could be good for the economy.

Although the basic technology exists to make the system work, once it moves beyond the planning and trial stages, it will require a significant investment to develop and install on-board devices on new vehicles, deploy the required supporting infrastructure, and set up collections and enforcement systems.

More significantly, the additional infrastructure spending that would be made possible with an increase in transportation revenues would create jobs and build a more efficient transportation network that moves people and goods in a more cost-effective way.

In its report on the viability of mileage fees, the GAO surveyed all fifty states and the District of Columbia and reported strong support for federal action to move toward this new financing method. And more than half cited the administrative costs of implementing the system as a serious barrier to moving ahead. By dropping its opposition to the concept and providing the resources needed to fund ongoing state pilot programs, and start new ones, the Obama administration could provide the economy a much-needed boost.

The nation needs an innovative, new approach to funding transportation, one that is sustainable over the long term. Leveraging existing technology to adopt mileage-based user charges could yield beneficial outcomes to keep us competitive in a global marketplace.

Noel Popwell is a freelance writer and a revenue analyst with New Jersey state government.

  • twk

    I am not convinced that VMT tax solves the fairness issue. While hybrids are taxed less, I suspect heavy SUV’s and trucks are under taxed based on the damage due to weight. So why only pick on vehicles with good gas mileage?

    Not sure how the location aspect would work. You would need to know where I went to tax me that way. This gets into the privacy issue (metadata can reveal a lot, just ask the NSA).

    What if I went on a cross country trip? Who gets the gas tax? Each state (or town) I go through? What does paperwork for that look like? How do I know it was calculated correctly?

    How do you pay your VMT tax? Right now I pay my gas tax at the pump (paid in advance). With VMT do I get a bill at the end of the year? How does someone with low income manage something like that?

    I can maybe see a VMT tax working for at the federal level (don’t care where you drive, just how far). But to get money to states you need to know where. You could very easily end up with a system as complex as the income tax system. Which opens opportunities or cheating.

    Perhaps a more fair approach is VMT tax that also factors in weight and is given to the state the vehicle is registered. The feds would get a percentage. So there would be in effect no federal gas tax. I know it still is not perfect. Need a simple system that preserves privacy.

  • A VMT tax is not a panacea, nor is the gas tax dead yet.

    There are a lot of issues here, so I will only have time to address a few.

    First, after the NSA disclosures, is the public going to trust the government to collect information on where and when we drive? Politically, the concept is going to be Dead On Arrival.

    The environmental examples contradict a move away from the gas tax. Without a gas tax, gasoline will be cheaper. So people will lose an incentive to buy efficient vehicles, or keep their vehicles in tune, or drive gently to economize on gas.

    Furthermore, the gas tax is the closest thing we have to a tax on carbon. Until a carbon tax can make it through Congress, should we eliminate its closest proxy?

    The system to collect the gas tax exists, is in place, and works pretty well. Any new system will start from scratch.

    Installing the new system will require a lot of spending. This is promoted as a good thing that will stimulate the economy. Any spending will create jobs, but is it the best way to spend private and public funds?

    Finally, conceptually it is not difficult to adjust the gas tax to adjust for inflation and for changes in average fuel economy. Increase it 60% to make up for inflation over the last 20 years. Plan future increases to counteract the planned increases in average fuel economy over the next 20 years. Politically, any tax increase that will take more money from the public in any form is not going anywhere in this Congress, whether on gas or on miles driven.

    The only real need for VMT taxes is for vehicles that do not use gasoline at all. Since they never enter a gas station, they will need something entirely separate than current experimental schemes that collect VMT charges when you fill up on gas. However, the vast majority of vehicles will still burn gasoline for many years to come and can still pay for the roads through a gas tax.

  • The problem with a VMT is that it produces more carbon emissions by not encouraging people to drive vehicles with higher gas mileage. I would entirely support eliminating the gas tax and replacing it with a VMT plus a carbon deposit of a penny per pound of carbon produced. That comes to $.20 per gallon of gasoline. (It should also apply to coal and natural gas combusted.) All carbon taxes collected should be not be used for roads, but should be refunded equally to everyone who files a US tax return. Road maintenance and repair (including highway patrol costs) could then be paid for by a VMT that is proportional to the weight of a vehicle since damage to roads is inflicted based on the fourth power of the vehicle’s weight. (This would have the happy result of moving most freight to low carbon emissions rail since the only reason truck freight happens right now is that trucking fees do not even partly cover the damage they do to the roads.) The VMT collected on a given road should be directly given to the government entity (state, county or city) that pays for the maintenance of that road. If a state or community wants new roads and believe such roads are worth going into debt for, the roads should be paid for by state or community bonds. Federal government should get out of the business of paying for roads altogether.

    Of course there are huge privacy issues with tracking VMT based on where the miles are traveled. Another option is to toll interstates and highways at high enough levels to to pay for their repair and maintenance. Local roads are already mostly paid for by property taxes. Transit subsidies should be paid for from general funds, preferably state or local.

    Basically if roads weren’t so heavily subsidized so as to make them currently free or extremely cheap, and if carbon spewers weren’t allowed to put as much carbon in the air as they wanted for free, transit wouldn’t need to be so heavily subsidized. If everyone were paying close to the true cost of their mobility, people would live closer to jobs and services, people would walk and bike more, and total miles traveled per person (by any means) would drop. We have organized our society and infrastructure around the idea that everyone needs to cover 15-20,000 miles per year, and that people are somehow harmed or their rights abridged if they can’t cover these 20,000 miles quickly and cheaply, no matter if debt must be used to pay for the true cost. We even try to solve fundamental social disparity issues in housing and education with mileage! (Not that it’s been effective.) This is a fundamental mindset that has to change.

  • Joe R.

    A VMT treats people who own electric vehicles the same as those who own gasoline-powered vehicles. If anything, policy should be strongly encouraging us to move towards electric vehicles. If there’s issues of not having enough money to fix roads, then perhaps we can first raise the gas tax more (and therefore more strongly encourage the move towards electric vehicles), and eventually consider tolling roads as the number of gas-powered vehicles drops too low to fund road maintenance.

    About the only vehicles which we should consider a VMT for are heavy trucks. Regardless of whether they’re powered by diesel or electric, heavy trucks tear up the roads much more than cars. A VMT for heavy trucks would strongly encourage moving long distance freight to rail. That in turn would mean much lower repair bills for highways. A gas tax, even if only 10% of vehicles on the roads were gas-powered, might then be enough to cover these lower repair costs.

  • Ted King

    Here in California there’s a regular ritual called the “smog check”. Now if the VMT were piggy-backed on the smog check system then there would be minimal start-up costs. The only problem is that the ritual is biennial.

    CA DMV’s Smog Check : http://www.dmv.ca.gov/vr/smog.htm

    Collecting a car’s odometer reading every year or two isn’t much of a threat to the driver’s privacy. It’s an aggregate figure with a decent baseline and only two geographic loci – the address of record and the location of the smog check service (biennial) or a cop shop (annual). One could be either circling one’s home neighborhood, driving all over an adjacent county, or some other travel pattern – there’s no way to tell.

    P.S. A greater threat to privacy would be putting together the license plate camera pictures from several locations.

  • Anonymous

    This is actually a great idea, and sidesteps the concerns regarding privacy and implementation cost. Couple this with congestion charging in major cities and you have a winner.

  • Anonymous

    No such thing as privacy on public roads. Cars should be tracked, all the time. Hit and run’s would be a thing of the past.

  • Anonymous

    VMT is one of the dumbest ideas out there. It rewards those who drive gas guzzlers. Hybrids and electric vehicles only make up a tiny fraction of of cars out there, they should be encouraged, not punished.

    If the problems is that congress is too ineffective to raise the gas tax, the solution is not to replace it with a worse, far more complicated, and far more invasive replacement.

    The gas tax is simple, the infrastructure is already there, it’s worked fine for decades. Increase the gas tax, all it takes is congressional courage.

  • Anonymous

    VMT is one of the dumbest ideas out there. It rewards those who drive gas guzzlers. Hybrids and electric vehicles only make up a tiny fraction of of cars out there, they should be encouraged, not punished.

    If the problems is that congress is too ineffective to raise the gas tax, the solution is not to replace it with a worse, far more complicated, and far more invasive replacement.

    The gas tax is simple, the infrastructure is already there, it’s worked fine for decades. Increase the gas tax, all it takes is congressional courage.

  • Nathanael

    For privacy and efficiency reasons, I would be OK with an “odometer fee” collected at the time of renewal of registration/inspection, but I would not be OK with the more complicated versions which involve complex tracking mechanisms.

  • Nathanael

    A gas tax needs to stay in place to discourage carbon emissions.

    A VMT fee should be STRICTLY collected as an “odometer fee” at the time of registration renewal or inspection. Keep it SIMPLE and LOW OVERHEAD. Nothing complicated.

    The cost per mile should be scaled according to how much damage the vehicle does: more for trucks, less for light cars.

  • Kenny Easwaran

    It seems better to just increase the gas tax to the level needed to price the externalities of fuel consumption, and charge congestion fees locally to price the externalities of land use and traffic. End the whole talk of “user fees”.

  • Kenny Easwaran

    It seems better to just increase the gas tax to the level needed to price the externalities of fuel consumption, and charge congestion fees locally to price the externalities of land use and traffic. End the whole talk of “user fees”.

  • Anonymous

    It’s pretty easy to fix your primary concern by adjusting VMT by vehicle weight, as we already do for many commercial trucks. Gas guzzlers are typically heavier, and such system should help dissuade their use.

  • Anonymous

    It’s pretty easy to fix your primary concern by adjusting VMT by vehicle weight, as we already do for many commercial trucks. Gas guzzlers are typically heavier, and such system should help dissuade their use.

  • Jack_VA

    The mention of VMT immediately brings forth mental solutions to the problem without much look at what has been tried and proven successful or found unsuccessful. In many cases the individual immediately jumps to a location based system based on global navigational satellite systems (GNSS), which is possible, but off-base.
    Others want to assume the penultimate “equity” system which includes environmental charging and some form of congestion charging. These people are also off base.
    VMT or Road Usage Charging as a replacement of the gas tax should be looked at solely as revenue generational policy, just as the gas tax that it replaces.
    While a location based service may be utilized, the Oregon Legislative Pilot test of 2012-13 indicates that “User Choice” is also possible and proven successful in their results. This basic market principle can be afforded drivers, since the technology we have at hand today supports it. If you want a simple system, one can be created without location based services by simple technology that reads the vehicle odometer or independently calculates the mileage. Alternatively, one can simply read the odometer at periodic inspections or annually at a vehicle safety or environmental check of the vehicle. Every other choice falls between these two extremes.
    The per-mile rate charge can be multiplied or reduced by the type of vehicle to promote more environmentally and cleaner vehicles. This simple solution worked in Germany for their truck tolling (MAUT) programme where dirty vehicle engines were charge an additional multiplier to the basic rate per mile. It worked to help clean up the dirty diesel engines and improve air quality in Germany.
    As far as the gas tax, it is not sustainable. The problem is not just the growing fleet of Electric, Hybrid and advance plug-in hybrid vehicles. The CAFE standards are pushing the internal combustion engine (ICE) to greater levels of economy. What use to be a 15-22 MPG model vehicle in most manufacturing fleets is now being equipped with higher efficiency engines, start-stop technology and greater fuel economy. Most vehicles on the car lots today are moving to 30-44 MPG with ICE technology. These are the vehicles we are purchasing and these are the vehicles that are making the fuel excise tax an outdate and insufficient revenue source.

  • Anonymous

    Glad to see most of the commenters here picking up on the fact that there’s no need for a VMT. It’s needlessly complex, it’s less fair than the gas tax, and it doesn’t solve any of the problems backers claim it does. The need for a canned response to pro-VMT arguments was one of the reasons I started blogging… http://letsgola.wordpress.com/2013/05/17/gas-taxes-are-not-user-fees/

  • Anonymous

    Odometers are incredibly easy to cheat if you want to. It takes no more than 30 minutes and some electronic reader and software you buy online for newer cars. It is really that simple for someone determined to turn the clock.

  • Anonymous

    Something I dislike about most modern discussions about transportation of people, housing and planning is how everybody appears to be out there with some sort of silver bullet, cures-it-all solution to complex problems. This article is no different.

    Some very issues were tramped over by this article. Road dynamic space use is an issue different than pollution caused by the way cars are powered and wear/tear to road infrastructure. Damage to roads and bridges is exponentially related to weight per axle. It is pure physics: a vehicle with double the axle weight load will produce more than 8 times more the wear and tear. It takes the wear cause by more than 400 cars to account for the wear caused by a single 18-wheeler loaded with construction supplies or other volume-dense payload. Bridges have a secondary effect related to total load at any given time. Fuel consumption is a bad proxy for wear and tear, VTM is worse as it charges the same.

    Congestion pricing or other charges related to availability of road space are an entirely different issue. Vehicles use some space related to their length, so a gaz-guzzler extended SUV uses not much more space than a subcompact car on the same road at same speed and weather condition. Every freeway has an optimum speed that carries maximum traffic throughput per hour. It is usually around 45-50mph for your run-of-the-mill Interstate: speed starts to slow down from the max (75-80) to accommodate more traffic, but after a critical point, the reduction on speed (allowing closer movement of vehicles) is overwhelmed by the reduction on capacity due to increased time spent by vehicles on a single sector, thus reducing overall capacity. Ideally, a VMT would be set a price that is low when there is excess capacity, and then increases rapidly when that maximum throughput is reached, as to avoid congestion (which sets on quickly with only a few extra % of cars entering the road than the maximum optimum). Gas use is an horrible proxy for that.

    Pollution is the only aspect of driving impacts that is reasonably assessed as a proxy by a tax on gas volumes.

  • Anonymous

    If a VMT relies on satellite positioning (GPS) to be logged in, this problem is moot

  • Anonymous

    re: “Hybrids and electric vehicles only make up a tiny fraction of of cars out there, they should be encouraged, not punished.”

    If someone buys a $50,000+ Tesla, how would they be punished by having to pay a VMT fee? They already get $7500 fed credit, plus $2500 from states like Calif.

    By using the roads and not paying for them, they become part of a different problem than the one they help solve.

    The Highway Trust Fund doesn’t just pay for roads, it pays for transit too – EV users need to contribute to the fund in proportion to the amount they drive, not the amount of gas they purchase, as do other vehicles.

  • Anonymous

    “The problem with a VMT is that it produces more carbon emissions by not encouraging people to drive vehicles with higher gas mileage.”

    I hear that a lot – but if you look at the price of gas – the tax is a small amount. If we were to, say, eliminate the gas tax and switch to a VMT fee – you would still see the same huge spikes in gas prices , and EV owners would still benefit, and you’d still see a movement toward more efficient vehicles in addition to EVs.

    Popwell’s point on “pro-environment” was: “It is fair to assume that increasing the cost of road usage by adding a separate bill for per-mile vehicle charges will result in further reductions in vehicle trips. As drivers become more aware of the true costs of driving, their overall demand for petroleum will decline, reducing vehicle emissions and moving us closer to energy independence and a cleaner environment.”

    I.E, all auto trips decrease with the VMT fee, in addition to the incentive to reduce driving gas guzzlers when gas prices increase.

  • DwayneKos2

    Tom Petri led a hearing on this issue not long ago (see info here: http://riponadvance.com/news/with-insolvency-down-the-road-petri-takes-action-now-to-shore-up-highway-trust-fund/4009) It seems the fund’s insolvency is unsustainable, witnesses suggest cutting other funds from transportation projects and – even that won’t be enough to keep it from depleting…we have a major problem on our hands here