Oregon’s Pay-Per-Mile Driving Fees: Ready for Prime Time, But Waiting for Approval

The state DOT says it's ready to expand a trial per-mile driving fee to all cars, but the legislature is focused on a plan that includes a gas tax hike instead.

Relying on the gas tax instead of replacing it with mileage-based driving fees could cost Oregon $340 million over 10 years, according to the state DOT. Image: ODOT [PDF]
Relying on the gas tax instead of replacing it with mileage-based driving fees could cost Oregon $340 million over 10 years, according to the state DOT. Image: ODOT [PDF]

Oregon has led the way in developing an alternative to the gas tax, with a program that levies a fee on vehicle miles traveled. While the Oregon Department of Transportation has spent years developing the mileage-based program and is ready to expand it to all vehicles statewide, it’s not part of the massive transportation spending package under discussion at the legislature.

Federal standards to combat climate change have required that automakers produce increasingly fuel-efficient cars and trucks. While the Trump administration is seeking to stop further progress on fuel-efficiency standards, there’s little it can do to roll back gains that are locked in through 2021.

As cars guzzle less gas, drivers end up paying less in gas taxes. So some states are thinking about charging for every mile driven, not just for every gallon of gas burned.

Oregon, which enacted the country’s first gas tax in 1919, is out in front on the transition to a mileage fee. The state began with a task force in 2001, followed by pilot programs in 2006 and 2012. It launched a permanent program in July 2015, capping participation at 5,000 vehicles. Car owners who volunteer for the program are charged 1.5 cents per mile, measured by a device added to their car. Participants are refunded for state gas taxes they pay at the pump, and out-of-state travel doesn’t count toward the total.

The math should work out so a driver with a car that gets 20 miles per gallon would pay the same amount in mileage fees as she does with the gas tax. Drivers with efficient cars would pay more than they do with a gas tax, while gas-guzzlers would pay less.

This change creates winners and losers. Rural drivers tend to have less efficient vehicles, so they would save money under a mileage fee system even though they drive longer distances, according to a study last year from Oregon State University [PDF]. Drivers in urban areas, meanwhile, would pay more than they currently do, because they tend to have more fuel-efficient cars.

Over time, as cars become more efficient, a mileage-based program would make up for gas tax shortages, according to a progress report on the program released in April [PDF]. “Compared to fuels tax, a [road usage charge] system would generate an additional $340 million dollars in gross revenue within the next 10 years,” the report says. “This is because the [road usage charge] model is not susceptible to increased vehicle fuel efficiency.”

Although car owners with efficient vehicles pay more with a mileage fee, they make up a large share of the volunteers in the Oregon program. “People with higher-mileage vehicles tend to enroll first. We’re not sure why that is; they might be early technology adopters,” said Michelle Godfrey, spokesperson for the Oregon DOT’s road usage charge program. “We’ve actually had challenges trying to recruit lower-MPG vehicles into the program.”

Earlier pilot programs assessed higher per-mile fees in congested areas and during rush hours. While it’s something the Oregon DOT is open to considering again, the current program is simply a flat per-mile charge. Unlike the earlier versions, the current per-mile charge system, known as OReGO, is slated to continue indefinitely, and ODOT is ready to roll it out on a bigger scale.

“This is ready to go at any time, should the legislature decide that they want us to implement this statewide,” Godfrey said.

Instead, the legislature is weighing a transportation funding package that would, among other things, hike the gas tax, institute a bike tax, and add annual surcharges for both electric vehicles and gas guzzlers.

ODOT’s April report on the OReGO program holds a dim few of some of these funding fixes, saying that “raising fuels tax is a short-term fix, not a long-run strategy” and that annual surcharges are “even less fair than the increasingly inequitable fuels tax.”

But it’s unlikely that mileage fees will be added to the legislature’s transportation funding plan, which is the subject of intense debate after a similar funding proposal fell apart two years ago.

“The transportation package that’s being considered this session is pretty big, and it’s probably too big for [road usage fees] to kind of fit in there,” says ODOTs Godfrey. “We’re just following directions from the legislature.”

  • D G Spencer Ludgate

    It really depends on the behavior you wish to limit… If your goal is to reduce carbon emissions, then hike the gas tax. If your goal is to limit ware and tear to the roadways, then you do a per mile tax based on the vehicle weight. Hiking either one of these will reduce congestion.

  • TakeFive

    After reading the linked article I got one of my questions answered, sort of. Still not sure I understand the lust for this. They claim the collection costs are not material but that’s with a small volunteer group. Whether that holds true under an “all in” program remains to be seen.

    My other question is how do they collect from out-of-state plates or do they just not concern themselves with this?

    The notion that increasing fuel efficiency hurts revenue is a political issue not a technical issue. All they have to do is raise the fuel taxes. Some states are now building in escalators. With respect to electric or hybrid cars they could handle that using VMT or through the registration fees.

  • crazyvag

    You gotta wonder what kind of crazy world we live in where VMT tax is seen as more likely to pass than a gas tax hike.

  • Southeasterner

    “If your goal is to reduce carbon emissions, then hike the gas tax.”

    Or just increase fuel efficiency standards.

  • Southeasterner

    Aren’t we just recreating the gas tax problem? We are arguing that gas tax revenue is going down because gas consumption is declining. The solution, implement a per mile based user fee on miles driven, which is stagnating and even declining.

    How many posts have we seen on Streetblog that show the ridiculous state DOT forecasts on miles traveled that always appear to be 45% angle trajectories, and the reality that is a flat line? The mileage based user fee revenue is based on the same ridiculous DOT projections. If miles traveled aren’t increasing you are going to hit the same issue you have with the gas tax, a declining revenue base.

    Oregon did however already discover the solution:

    https://www.orcity.org/publicworks/transporation-utility-fee

    Transportation utility fees are the way forward and they have proven to be successful revenue generators that are transparent to customers. Apply the fees to trip destinations instead of trip origins and you have your infrastructure funding solution.

  • disqus_1pvtRUVrlr

    So gas guzzlers pay less in tax, and more efficient vehicles pay more than compared to a gas tax. Please explain this upside down logic to me. It removes any penalty/disincentive to consuming more finite resources. And yes, I understand the need for EVs to pay some sort of roadway tax since they don’t consume gas, but this logic escapes me.

  • D G Spencer Ludgate

    Actually, a hike in the gas tax will have a faster effect. Consumers will switch to alternatives (i.e.electric, more fuel efficient, mass transit, etc,) at a faster pace than government regulations. The free market will be more efficient in the long run.

  • mckillio

    Gas guzzlers paying less doesn’t make much sense but fuel efficient vehicles should definitely pay more.
    Roads are a finite resource? The gas tax was implemented to help pay for roads, not to pay for their pollution or lower oil consumption.

    I would argue that the gas tax should stay but amended to account for the cost of the pollution caused by gasoline.

  • Charles Siegel

    The basic principle is that we should tax externalities – make people pay for the social and environmental costs they create so they create fewer of these costs.

    Transportation utility fees don’t do this. You pay based on the expected number of trips for your land use, which means that my family, which owns three bicycles and no cars, pays the same amount as the family that lives next to me, which owns three cars, because we live in the same sort of house that generates the same number of expected trips. Externalities are also not taxed if you apply the fee to destinations rather than sources of trips: businesses that are destinations pass the fee through to all customers, whether the customers walk, bike, or drive to the business.

    VMT is flattening out, as you say, but gasoline use should decline to zero by the end of this century, while VMT will not decline to zero. Gas tax revenues are ultimately going to disappear completely. The VMT tax is a reasonable substitute for the gas tax: it makes people pay for the external costs they create, and it can be set at whatever level is needed to maintain the infrastructure we have.

  • Derek Hofmann

    If your goal is to reduce congestion, then hike the congestion charge.

  • The argument that charging a VMT tax will create a disincentive to drive a more fuel-efficient car (whatever that fuel might be) misses the point that the drivers of those cars are still paying a LOT less for gas overall. Whether I’m driving a Prius (hybrid) and paying a mileage fee or a Focus (all gas) and paying a gas tax, the cost to fuel the car is so much lower than driving an SUV, pickup truck, or even a standard midsized car that the government fees and taxes are a rounding error. My decision to drive a hybrid is not because of the fuel tax. It’s because of the cost of gas overall (and because I try to use less fossil fuels in general.) Same reasons I drive about 1/3 of the amount as the average car owner. (I like to go on road trips, or my annual mileage would be even lower.)

  • Southeasterner

    Just like the gas tax there will be zero political appetite to “set at whatever level is needed to maintain the infrastructure we have” you have the exact same issue.

    Your attitude towards the utility fees is based on antiquated assumptions on how utility fees can be calculated and the technology available to assess utility fees. In fact you are ignoring some of the same technologies that could be used for utility fees that are required to administer mileage based user fees. So a bit hypocritical. We now have more than enough information to allow us to incorporate mode choice into a utility tax, further more you could actually use a carrot instead of a stick for local businesses to self report employees commute choices (we already do that here in Seattle) and incentivize access to transit and secure bike storage for retailers.

  • There’s an error here, Stephen:
    “Instead, the legislature is weighing a transportation funding package that would, among other things, hike the gas tax, institute a bike tax, and add annual surcharges for both electric vehicles and gas guzzlers.”
    The annual surcharge would apply to fuel efficient vehicles:

    From Planetizen: Oregon Legislature Passes Gas Tax, Includes Bike Tax, July 12:

    A variable vehicle registration fee based on fuel economy

    “Vehicle registration will be priced on a tiered system, where owners of fuel-efficient and electric cars pay more, since those cars contribute little or nothing to gas tax revenues,” writes Friedman. Here’s the fee schedule from the Statesman Journal:

    CAR REGISTRATION FEES: Raises the basic fee to $56 and adds sums based on miles per gallon beginning in 2020:

    — For vehicles that have a rating of 0-19 MPG, $18

    — For vehicles that have a rating of 20-39 MPG, $23.

    — For vehicles that have a rating of 40 MPG or greater, $33

    — For electric vehicles [EV fee], $110.
    https://www.planetizen.com/node/93714/oregon-legislature-passes-gas-tax-includes-bike-tax

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