State gas tax could be replaced by mileage tax

[11B4V]

http://www.usatoday.com/story/news/nation/2013/08/01/oregon-gas-mileage-tax/2608067/

State gas tax could be replaced by mileage tax

Two years from now, thousands of Oregon drivers could get a taste of what the future may hold for the rest of us: They will pay taxes not on the amount of gasoline their cars burn, but on the number of miles they drive.

The move to a vehicle miles traveled (VMT) tax, if it happens, is still a long way off in most corners of the country. But that is why transportation experts and elected leaders are so interested in seeing whether Oregon can make it work.

"Per-mile charges are the most high-profile and discussed possible alternative to the gas tax," said Jaime Rall, a transportation policy specialist at the National Conference of State Legislatures. "There's no question about it: States want to know if this is going to be a viable way to fund transportation into the future."

States are looking for an alternative to the gas tax, because the per-gallon taxes often do not keep up with inflation, and they are bringing in less money as cars become more fuel-efficient.

Oregon hopes its new program using 5,000 volunteer drivers will show the public, not to mention hesitant lawmakers, that this alternative is easy and fair. And officials want to prove it can be done without Big Brother-type tracking devices.

Whether taxing miles instead of fuel is a good idea in theory, the Oregon project could answer questions about whether it is a good idea in practice. Seventeen other states have also tested the idea, but none has gone as far as Oregon has.

Here are answers to some basic questions about the Oregon program, which lawmakers approved in early July. The bill now awaits a signature from Gov. John Kitzhaber, a Democrat. Kitzhaber spokesman Ian Greenfield said the governor supported the bill throughout the legislative session. If the bill clears legal review, Kitzhaber would likely sign it before his Aug. 19 deadline for signing bills.

How will it work?

The new program would start in 2015 using only volunteers. Drivers would choose one of several options to keep track of the miles they drive. All of the options would be provided by private companies.

The choices fall into two broad categories. Basic mileage meters would keep count of miles driven using a car's odometer. More advanced meters would use GPS technology to keep track of how far and where cars travel to make sure drivers are not charged for out-of-state or off-road trips.

Eventually, Oregon officials hope that a smartphone app can be developed to supplement the basic meters. Drivers would be able to turn on the expanded service software while they drive out-of-state or on private roadways to automatically report those mileage exceptions to the state.

The mileage meters would also be linked to cars' fuel gauges to measure and report how much gas motorists use.

Meanwhile, the volunteers would still pay gas taxes at the pump. The state would compute how much money drivers paid in gas taxes and subtract that from the amount they owe in mileage taxes. The state would then send a bill for the difference.

How much more or less would drivers pay?

Besides Oregon, 17 states have conducted studies of mileage taxes. Most of them were part of a four-year University of Iowa study funded by the federal government.

Drivers with gas guzzlers would do well under the new program. Oregon's gas tax is currently 30 cents a gallon. The mileage tax under the legislation would be 1.5 cents a gallon. So anyone driving a car averaging fewer than 20 miles per gallon would pay less money under the mileage tax than the gas tax and maybe even get a refund.

The average fuel efficiency for small vehicles in 2010, according to the U.S. Department of Transportation, was 23.5 miles per gallon. The Obama administration last year set efficiency goals for 54.5 miles per gallon by model year 2025.

What about people with new cars and electric cars?

James Whitty, who helped develop the program for the Oregon Department of Transportation acknowledged it would be a tough sell to get people with super-efficient vehicles to volunteer for the 2015 launch. But he stressed that the legislation passed less than a month ago, and the department has two years to figure out how to encourage drivers of efficient cars to take part.

That's important because the program allows only 3,000 of the 5,000 slots to go to cars that travel 22 miles per gallon of gas or fewer. The remaining spots are for more efficient vehicles.

A working group of lawmakers, transportation officials and citizens proposed applying the mileage tax only to all new cars sold starting in 2015 that run 55 miles per gallon or more. Under that plan, all other drivers would have continued to pay the gas tax.

The idea gained traction in the state House but faced a steeper climb in the Senate. Oregon requires a legislative supermajority to approve any new taxes, so the new method of taxing efficient vehicles needed the support of three-fifths of state senators. Rather than risk failure, the Senate sponsor pushed the voluntary program instead.

What about privacy?

Oregon tried a pilot project between 2006 and 2007 that used state-issued transponders to count miles. What the state found, Whitty said, was the arrangement was expensive and the public did not like having a GPS tracking device installed in their cars.

That is why Oregon turned to private companies during a follow-up pilot program last year, which it conducted with Nevada and Washington state. Mile meters are already on the market for tracking trucks or for allowing insurance companies to charge customers based on the distances they drive.

This year's legislation limits who can see the information reported by the meters, and it requires the state and private entities to destroy location information from participating drivers within 30 days of using it for billing.

Why Oregon?

Oregon is not the only state to test the idea of a mileage tax. In fact, 18 states have run some sort of demonstration, said Rall of NCSL. But Oregon, which began exploring the idea in 2001, is the first state to actually charge drivers the tax during the 2012 trials. Other states reported how much money drivers would owe but did not collect that money.

"We are forward-looking enough to realize a better solution really isn't out there," said Oregon state Rep. Vicki Berger, a Republican.

Oregon is also one of four states (along with Kentucky, New Mexico and New York) that charges trucks taxes based on their weight and the amount of miles they drive. So the state transportation department has experience handling mileage fees, Berger said.

What is it like to drive with a mileage meter?

Both Berger and Whitty, the transportation official, participated in the last pilot project, which is the model for the program that will launch in 2015. Both said the test went smoothly.

"The sign-up was easy," Whitty said. "Choosing your plan was not a problem. Installation was far easier than anticipated. It took people seconds. . . . And then bill paying was accurate. Basically, we hit a grand slam."

Berger said a light glowing from the mileage meter let her know it was working. Otherwise, she said, "it did not change my life at all." Berger, who drives a Volvo that gets 25 to 27 miles per gallon, said her monthly bills using the mileage tax often were "literally pennies."

For most drivers, Whitty said, the difference between what they paid at the pump and what the extra amount they owed for miles driven was so small, it was barely worth sending the bills every month. The new legislation lets the department send out bills less frequently.

What other options do states have for taxing highly efficient vehicles?

At least 27 states tax alternative fuels used in vehicles, such as natural gas, electricity or ethanol, according to NCSL. Virginia this year became the 10th state to impose a fee on owners of alternative fuel vehicles. Virginia's new fee also applies to hybrid vehicles.

[MadBurgerMaker]

I think I need to go home for the day.  I read the first sentence as "Thousands of years from now, two Oregon drivers could get a taste of what the future may hold for the rest of us:" and was really confused for way too long.  Derp.

[Ideologue]

I drove 26.3 miles this year.  On my honor.

[The Brain]

I drove 26.3 miles this year.  On my honor.

On your foot.

[11B4V]

I drove 26.3 miles this year.  On my honor.

Then your tax would not be that high.

[Admiral Yi]

I drove 26.3 miles this year.  On my honor.

The system relies on a GPS tracker.

[11B4V]

I drove 26.3 miles this year.  On my honor.

The system relies on a GPS tracker.

So the govmint could track you Ide.

[Ideologue]

I know.

I don't understand why they don't simply tax fahdiz more.  Surely that could get 3/5 of the vote.

[viper37]

There's talk on this in Quebec, as a solution for Montreal problems, rather than taxing the bridges.  The Oregon example was cited.  It's one way to get back at those hybrid&electric car drivers.  That way, they will share the tax burden too, to maintain the roads they use.

[mongers]

Well a gas tax can be quite regressive, plenty of people live and work in places where they need to use a car, so a mileage system biased by a model for rural/urban travel and commuting would work better. 

The issue of damage to roads in interesting, I'd suggest something exponentially increasing with curbside/loaded axle weight of vehicle used. Around here with have stacks of blinged out SUVs that are simple not necessary for the roads. And they cause considerable damage to the surface and edges of lanes/minor roads.

[Admiral Yi]

Given that a usage tax such as mileage or gas is intended to internalize the the free rider problem of a public good, and is therefore designed to mimic to the extent possible private consumption, it seems to me the regressivity is the least of our concerns.

[mongers]

Given that a usage tax such as mileage or gas is intended to internalize the the free rider problem of a public good, and is therefore designed to mimic to the extent possible private consumption, it seems to me the regressivity is the least of our concerns.

To me it's the most important concern.

[Eddie Teach]

People in Civics don't put as much wear on the road as people driving the same distance in a Hummer. I think they should stick with gas taxes.

[frunk]

People in Civics don't put as much wear on the road as people driving the same distance in a Hummer. I think they should stick with gas taxes.

That's true, but I can see the problem with hybrids/electric going too far the other way in not reflecting the wear and tear of low/no gas usage vehicles.  Making it a vehicle weight/mile tax makes a lot of sense to me.

[Eddie Teach]

They could also raise taxes on electricity.