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Gas Tax

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

12:49 PM EDT on August 12, 2013

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.

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.

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