Mileage-Based Fees or Bust: New Report Says “No More Excuses”

The shortcomings of the current gas tax are well-known. The federal rate (18.4 cents/gallon) has not been raised in nearly twenty years and is not tied to inflation, yet it remains the primary source of funds for federal transportation spending. The problem is exacerbated by improving vehicle fuel economy. And as electric cars roll off the assembly line in greater numbers and become the vehicle of choice for more drivers, relying on the gas tax as the primary source of transportation funding makes even less sense.

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This perfect storm suggests the time may be right to adopt vehicle miles traveled (VMT) fees — charges based on how much people drive — to pay for the nation’s surface transportation system. Congress is unlikely to pass a multi-year transportation bill anytime soon, and current stop-gap funding is due to expire at the end of June. But the results of a two-year University of Iowa VMT national field study offer a path forward for sustainable funding of surface transportation.

Preliminary findings from the federally-funded field study (the full report has not yet been released by the Department of Transportation) show that the system could work on a nationwide scale. The results, contained in a Transportation Research Board Journal paper authored by University of Iowa professors Paul Hanley and Jon Kuhl, also show that the public would accept the concept of paying a fee for road use based on distance traveled instead of gas consumed.

The field study was based out of 12 sites, monitoring more than 2,600 volunteer participants who drove a total distance of 21 million miles throughout the United States (except Alaska and Hawaii), for an average of roughly 9,000 miles per driver.

The study deployed a prototype mileage-based charging system with an on-board unit installed in each participant’s vehicle. The unit computed mileage-based user charges for federal, state and local jurisdictions and periodically uploaded accrued charges via a cellular link to a central billing center. The center subsequently created monthly billing statements that were sent to participants.

Privacy concerns, often cited as an argument against VMT-based charges, were taken into account in the study’s design. While the onboard unit in each vehicle used a GPS receiver to determine driver location for the purpose of assessing state and local charges, the system did not retain or transmit any specific information regarding vehicle location or routes travelled.

The results of the field test showed that a nationwide system of mileage-based fees is completely feasible using existing technology. Early misgivings on the part of drivers faded as they gained more experience with the system: At the outset of the study, only 42 percent of participants held a positive view of GPS-based mileage fees; approval increased to 70 percent by the study’s end.

The results also indicated a marked preference for accuracy over privacy on the part of participants. Over the course of the study, the monthly invoices issued to drivers were presented in varying degrees of detail. A whopping 60 percent of participants favored highly audited statements, which include a daily review of miles traveled. Only nine percent preferred the maximum privacy version, which lists only the total miles traveled per month. (In a second phase of the study, a modified version that fell somewhere between the two was favored by most of the participants.)

Three years ago, two separate federal commissions on surface transportation released reports recommending that the federal gas tax be gradually replaced with VMT charges. But the White House flatly refused to seriously consider the proposals at the time. With the House and Senate now at loggerheads over how to fund the nation’s transportation system – the House has taken a tenth short-term extension to a conference committee with the two-year bill the Senate passed in March – it is highly unlikely that a multi-year transportation bill will pass this election year.

We know that a national vehicle mile user fee system can work. The administration ought to take the initiative and support what most experts say is a fairer, more sustainable method to fund our roads, bridges and transit. But that likely won’t happen until long after the November election.

26 thoughts on Mileage-Based Fees or Bust: New Report Says “No More Excuses”

  1. This is utterly insane.  Completely batshit.

    The solution to the unbelieveably simple and correct solution of a carbon tax (if through the proxy of a “gas tax” which is crazily diverted to highway interests and thus to more driving rather than to mitigating the coming ecological collapse) is to spend hundreds of billions of dollars to install tracking technology — tracking technology that will be systematically abused by law “enforcement” — in every vehicle in the nation?

    Change a single line of software configuration in the machines (fuel pump accounting systems) that already are set up to collect taxes, machines that are orders of magnitude fewer in number, are in fixed locations, which already exist and already have the software and hardware needed or … blow billions buying new hardware and software on every single vehicle.

    Actively rewarding fuel inefficiency by increasing the fixed costs of a trip while decreasing the marginal costs?  Just brilliant.

    Sure, “think tank” scam artists come up with this stuff at the drop of the hat.  But what is streetsblog doing reporting on this manifest nonsense with a positive slant?

    Cui bono?

  2. “The solution to the unbelieveably simple and correct solution of a carbon tax”

    I think the issue of a carbon tax is completely different from the issue of how to fund our transportation system.

    As Richard points out, we’ve basically discovered that funding transportation agencies through the gas tax is as terrible idea, because what it does is invest everyone in the idea that they must do everything they can to encourage more and more and more driving because more driving is what generates the revenue that funds the system.

    The puts a huge incentive on the whole system to, well, create more driving and lots of it.

    In a perverse way, it incentivizes the very thing that a carbon tax is designed to de-incentivize.  Partly that is because the gas tax is so low (if it were 3-4-5X the current amount, things might be different) and partly because it is paid in an invisible and generally unnoticeable manner.

    At any rate, now every transportation agency is off the fuel tax bandwagon because they see the writing on the wall–it is an ever-decreasing resource, both in the projected future and in the actual recent past.  You’re never going to be able to keep increasing the fuel taxes quickly enough to be able to fund the transportation system.  You’ll have to continually increase them a lot just to maintain the status quo, as fuel mileage increases, miles driven stays flat or grows slowly, and as other transportation options (everything from hybrids to transit to walking) grows in popularity.

    The solution is to fund transportation from general tax revenues, which everyone contributes to, and then make damn good and sure that the transportation system meets the needs of EVERYONE, not just drivers.  But moving from fuel tax to general tax would instantly change the political landscape more in favor of transportation rather than in favor of driving.

    A mileage tax will move it in the opposite direction–‘drivers’ are paying, and so they will expect the benefits.

  3. Richard understates the case.

    The deployment of such a system is a nightmare:  there are several hundred million vehicles in this country.  Security has not been discussed:  people will discover how to fake the reports to minimize their bills, Anonymous (or their equivalent) will discover how to fake other peoples’ reports to maximize their bills.

    Why people think that because no-one wants to raise the gas tax they will suddenly become amenable to instituting a whole new tax is totally beyond me.

  4. Just increase the gas tax and tie it to inflation. This would still penalize people who drive gas guzzling vehicles while avoiding the logistical nightmare of tracking everyone’s driving.

  5. I agree with the idealism motivating some of the comments, but disagree with the conclusion that this isn’t worth pursuing. 

    First, “Me,” yeah, it would be great if we could just increase the gas tax. You make it sound so easy. Except that no Democrat or Republican seems willing to even whisper the suggestion, let alone push for it. (Yes, they all suck.) So it isn’t so easy. Let’s face reality for a minute here.Second, we’re going to have to switch to mileage-based fees if and when electric vehicles ever gain widespread acceptance, as many project will happen.  This fee rewards cycling and transit riding, and prevents transit riders and cyclists from subsidizing motoring. So a distance-based user-based fee is a more socially equitable funding source for transportation than general taxation.Third, we need to find a way to pay for transportation. The gasoline tax was enacted as a proxy for a mileage based user-fee at a time when the technology described here did not exist. Now that it does exist, we can switch to a mileage based user fee and dump the dirty word, “tax,” that goes along with gas tax that makes it so hard for everyone to raise as an issue. Sadly, the fact that the gas tax now serves as a proxy for a carbon tax is a secondary and fortunate benefit of it, but it was not the intent. Let’s enact a real carbon tax to go along with a distance based user-fee, and everybody will benefit.

    Fourth, at the same time, let’s mandate a switch to mileage-based insurance. Why do we allow insurance companies to encourage driving with all-you-can-eat insurance plans? Paradoxically, distance-based insurance would probably cost motorists less annually, but it would also reduce vehicle miles traveled, because it would empower people to reduce their expenses by driving less.

  6. I think the idea of a mileage tax is worth considering, but the proposed implementation seems absurdly complicated to me, not to mention the privacy concerns. How about just taking an odometer reading? It can be done whenever the vehicle goes for emissions testing, or when it is sold or de-registered.

  7. VMT is a terrible idea. First it penalizes electric & high MPG vehicles while rewarding guzzlers. It is ridiculously expensive to implement, and has serious privacy concerns. If electric vehicles become the norm, then we can think about changing the system, but I for one would never want a tracking device in my car.

    I strongly support increasing the gas tax (and then indexing to inflation), and strongly oppose VMT.

    Brent, I don’t think you understand the idea of an incentive in this situation. A gas tax disincentivises driving because it increases the cost of driving. Europe has very high gas taxes, and much lower miles driven per capita. If the gas tax were raised to where it should be, people would drive less.

  8. Not mentioned here is an extension of the VMT approach that would provide significant benefits to tax payers.  That is: varying the tax rate by time of day (otherwise known as congestion pricing) for urban areas.  Congestion pricing has HUGE benefits in terms of system efficiencies (read: cost-savings), health, time-savings, etc.

    Instead of constant borrowing to spend billions annually on new roads, just for the sake of mitigating congestion that occurs one or two hours a day, we can better manage the roadways we’ve already built.

  9. vnm:  The T in VMT stands for Tax.  No-one will be fooled by trying to relabel it a distance based user fee.  The people who oppose increasing the gas tax will equally oppose any equivalent tax.
    qrt:  Not all cars are required to undergo emissions testing.  Not all states require safety testing for reregistering.  It’s perfectly possible to buy a car and run it until it’s junked without anyone checking its odometer.  Odometers can be reset (it’s illegal, but if there’s money involved …).

    The amount of middle-class thinking here is enormous.  It’s assumed everyone will comply with the law.  No, people won’t.  They don’t comply with speed limits.  At least some people bypass their catalytic converters.  I repeat, there has been no thought given to securing this system.  I can think of multiple ways to avoid paying this tax.  A simple man-in-the-middle attack (which can be implemented in a box that simply sits over the VMT box, which will be available a week after the tax is implemented) would be my first choice.  A swamping attack is likely to have a good effect.  And, if all else fails, the box is sitting in my car in my garage.  I can get to it at any time and reflash the firmware (and there will be people to sell me a kit that does that!).

    Opposing this is not idealism, it’s hard-headed practicality.  The idea is, as Richard so beautifully put it, batshit insane.

  10. You have got to be kidding me.  This thing is aiming for a head-on collision with populist paranoia.

    Do you think Tea Party Nation will accept government tracking devices placed in their cars for the purpose of levying a tax?  (yeah, I know it’s a fee but that’s not how it’ll be framed.)

    States may pass constitutional amendments prohibiting DOTs from from even thinking about installing these things in cars.  They may even find a lawyer who will argue to the Supreme Court that it’s an unconstitutional taking.   Stranger things have happened.

    Maybe I’m wrong.  But even if so, I’m also unclear on why sustainable transportation advocates should be in favor of this.  Wouldn’t it be better to charge based on gas use to encourage fuel efficiency?  I don’t get how a VMT charge is “fairer.”

  11. People who drive pricey electric vehicles are able to skirt the fuel tax.

    Sounds like an argument for the 1%.

  12. …and yet the government is actively subsidizing electric vehicles: in R&D, in manufacturing, tax rebates for purchasers, in funding infrastructure, and in perks like HOV lanes. How crazy is it to go to such lengths to subsidize electric vehicles, only to then institute a complicated new tax because they’re not “paying their fair share”? Just raise the gas tax and ditch the subsidies, and you have the desired effect without the ridiculousness.

  13. If you do VMT, you should include a provision for GVW (Gross Vehicle Weight).  Heavier vehicles pollute more, are more likely to kill, use more resources to manufacture and damage the road more quickly than lighter vehicles.

    The Highway Trust Fund is depleated because the gas tax is too low and there are too many roads to maintain.   A much easier solution would be to raise the gas tax and stop building new roads.

  14. Doesn’t this dis-incentivize fuel efficiency? That seems insane. It’s addressing the wrong problem – it’s not that people are travelling, it’s that they’re polluting while doing it. Everything we need to accomplish is done by making energy – both gas and the electricity used to charge EVs – more expensive. Charging people by mile, regardless of whether those miles are travelled in a gas-guzzler or a low-impact vehicle, might raise revenue, but it sets up exactly the wrong incentives for energy and the environment.

  15. Transportation revenue generation via VMT is great.  It uncouples fuel efficiency from transportation revenues (thus relieving the pressure to sell gasoline, allowing for investment into fuel efficiency without negatively impacting the revenues needed to maintain roadways).  For those with comments regarding the fuel tax as having anything to do with the environment or air quality, it doesn’t.  The purpose of the fuel tax is to have a user based fee for funding transportation system construction, maintenance, and operations.   The primary issue with using VMT to generate revenues, as I see it, is equality.  Often times low income workers live a greater distance from their place of employment and using VMT could place an unfair burden on those members of the public (although a gas tax does the same thing, right?).  

    Using VMT may also make the public more aware of their driving habits, offering direct savings those who choose to use other modes of transportation.  I bet we could all take fewer trips in our vehicles, but because the way we are currently taxed there is a disconnect between how many miles we actually drive and our tax.       

  16. The Trust Fund is depleted because too many non-payers are being subsidized at the expense of those who buy motor fuel and heavy trucks and tires – the only sources of income to the HTF.

    The fund is only taking in revenues of about $35B per year. Transit gets $6B right off the top. SAFETEA-LU is funding transit at $10B per year, and highways at $41B per year. The General Fund is making up a $16B per year shortfall.

    Many will not support higher fuel taxes because they see so many needed funds squandered by Congress.

  17. One more thing, the privacy issue is a moot point.  What do people think Google does to give the provide live traffic reports (tracks cell phones), or Apple does, or companies do with credit cards every time they are swiped, or even what the ITS solutions are on highways (closed circuit camera systems feeding directly back to your state DOT).  This illusion of privacy is ridiculous in the world today.  Plus doesn’t an odometer track mileage in your car today? Couldn’t you just be taxed based on annual change in mileage when you register your car? Come on…  

  18. If you increase the gas tax, but then promote more sustainable solutions (fuel efficiency, electric vehicles, driving less, etc.) then how does that solve the problem? You are essentially advocating for critical funding to decrease along with fuel consumption. Road improvements and maintenance reduce emissions by reducing traffic, and ensure that our structures like bridges and tunnels are safe to use. To use an extreme scenario, if you raised the gas tax but more people choose to drive electric vehicles, there would be even less funding for basic upkeep of our roads. So how many more bridges would be like that one in Minnesota?

  19. This reminds me of an idea I had about implementing a system where drivers are charged an insurance rate based on how they drive.  Some car insurance companies have incentives where they send you a device to track how you drive for some amount of time, with the possibility of a reduction in your premium if you don’t accelerate like crazy, slam on your breaks a lot or drive during certain hours.  This could be an interesting trial to see if it will reduce some of the wreckless driving behaviors on the road.  

  20. Privacy is not a moot point. Just because privacy is being violated by private industry and government means we should give up all privacy, and allow any further violation they want to impose on us? I think not. I can turn off my cell phone or leave it at home. I’m fine with privacy issues that I have control over, I’m not OK with them when they are imposed upon me.

    An odometer tracks mileage for my usage, and people can and do already change odometer readings, if there’s a tax associated with it, it will happen much more often. Again, the gas tax works and provides the proper incentives, why change it with something expensive that reverses the incentives? It makes no sense, just raise the gas tax.

    Even if the odometer was used, it would have to be read somewhere by somebody which would be both a violation of privacy and cost money to have somebody reading.

    At the point where fuel efficiency gets so great that a gas tax no longer makes sense then we can worry about an altervative, but that day is decades away, and in truth there’s already a better alternative than a tracking device in all cars: bridge & freeway tolls.

    Congestion pricing can be done without tracking devices as well. it can be applied at toll stations (as they already do on the bay bridge) and via congestion charges like they do in London.

    If you want to do a congestion charge with VMT, you really do need tracking devices, as it needs to know where you are and when you are there in order to charge different rates for congested areas.

  21. You’re making it too hard.  Have the vehicle owner write down their odometer reading when they send in the renewal form.  Spot check a percentage of renewals.  Heck, the emissions check stations already collect mileage readings.  Self-reporting with spot checks works for the IRS, it can work here, too.

  22. As mentioned before, mileage-based fees help people make more informed decisions about driving.  They also encourage people and businesses to locate closer to the people and places that they interact with.  (This is in contrast to the cordon tolling system in London.  If implemented in the USA, such a system would encourage people to move away from the cordon, exacerbating sprawl.)

  23. this is absolutely horrible. big brother at it again. the people of the united states will not go for this.

  24. Welcome to the new Communist country of America. The motto of our U.S. nation will be let us fleece you. Representatives need all of your money to maintain their jobs and spending. Highway robbery at its best.

  25. Entering comments on this site will not help you stop the these people in D.C.. You must vote them out, all of them !!!  Send the representatives emails, letters and whatever else you must to oppose this highway robbery. Tell these rats that you will not vote for them ever, if they don’t trash this GPS idea and stop the spending and sending money to our enemies. We have been sending money to poor nations for more than 80 years, 80 years and they are still the same. Missionaries have been going to these poor nations and they still can’t help themselves. 

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