Proposal for government to study driving tax by mile

I’ve occasionally written about the gas tax (see here and here for recent examples) as well alternative forms of deriving tax revenue from driving (see here). There is a report that the Obama administration has proposed a new federal study that would look at taxing drivers per mile driven:

The Obama administration has floated a transportation authorization bill that would require the study and implementation of a plan to tax automobile drivers based on how many miles they drive…

Among other things, CBO suggested that a vehicle miles traveled (VMT) tax could be tracked by installing electronic equipment on each car to determine how many miles were driven; payment could take place electronically at filling stations.

The CBO report was requested by Senate Budget Committee Chairman Kent Conrad (D-ND), who has proposed taxing cars by the mile as a way to increase federal highway revenues…

The administration seems to be aware of the need to prepare the public for what would likely be a controversial change to the way highway funds are collected. For example, the office is called on to serve a public relations function, as the draft says it should “increase public awareness regarding the need for an alternative funding source for surface transportation programs and provide information on possible approaches.”

I have several quick thoughts about this:

1. Doesn’t the government have to go to some method like this in the future with the advent of electric cars? If people are buying less gasoline (which is generally thought of as a good thing), then gas tax revenue will decrease.

2. If a tax like this were implemented, does this deincentivize purchasing electric cars or more fuel-efficient vehicles? Although you might pay less at the pump for gas, you would then pay more for driving longer distances.

3. How much of this is going to turn into a public relations battle? It is interesting that the proposed study would look into this. I’m sure a few things would worry some people:

a. How is the government going to use this tracking information since they will already be tracking the miles driven? Of course, this is potentially already an issue in states with toll transponders like Illinois and the IPass system

b. Is this a tax on mobility or on the American way of life (i.e. sprawl)? It would be interesting to see how this new tax might compare to existing costs for driving. Overall, this article reminds me that driving is not cheap – it may feel like freedom but it is expensive freedom.

4. Is a tax for miles-driven too broad? Different vehicle sizes put different stress on road surfaces. Should a tax also take this into account? Or is the difference between a Honda Insight and a Honda Pilot not significant?

5. There could be some interesting consequences of this. Would there be fewer road trips and driving vacations? Would the airline industry (and the rail/high speed rail industry) benefit? Would putting the costs into miles driven rather than tacked onto a gallon of gasoline make people think twice about purchasing a home further from their work?

How to offset the lower gas tax revenues from electric car drivers

With more electric cars coming to market, more state governments are discussing how to offset the loss of gas tax revenues from electric car drivers:

After years of urging residents to buy fuel-efficient cars and giving them tax breaks to do it, Washington state lawmakers are considering a measure to charge them a $100 annual fee — what would be the nation’s first electric car fee.

State lawmakers grappling with a $5 billion deficit are facing declining gas tax revenue, which means less money to maintain or improve roads.

“Electric vehicles put just as much wear and tear on our roads as gas vehicles,” said Democratic state Sen. Mary Margaret Haugen, the bill’s lead sponsor. “This simply ensures that they contribute their fair share to the upkeep of our roads.”

Other states are trying to find solutions to the same problem, as cars become more fuel-efficient and, now, don’t use any gas at all.

The two main options for this are either to impose an annual fee or to base payment on how far the car travels. But the cost-per-mile approach seems to have several disadvantages (including a good amount of opposition) even though it seems like it would be the closest to the gas tax (the more you drive, the more you pay).

The last paragraphs in the article seem to hold the key: this is another instance when government is trying to catch up to the newest technology. On one hand, governments don’t want to discourage the purchase and use of electric vehicles. On the other hand, roads still need to be built and maintained. Additionally, most states are facing large deficits and can’t be going about taking in less revenue.

Regardless of what route is taken, it seems like it would be better to make decisions like these sooner rather than later so that future electric car drivers know what they are getting into.

Federal budget issue: increased fuel effiency, reduced revenues from the gasoline tax

Amidst discussions about infrastructure and the price of gasoline, Obama’s administration has called for an increase in transportation spending. But where exactly the money will come from to fund this increase is unclear:

[Transportation Secretary Ray LaHood] said Obama is not in favor of raising the gas tax in a “lousy economy.”

The new tax would be necessary, in part, because the gasoline tax used to fund the highway trust fund is collecting less revenue than projected due to increasing fuel efficiency.

The exchange between Sessions and LaHood degenerated into a shouting match, with the Transportation secretary emphasizing that infrastructure can be improved and jobs created while paying down the debt.

This is one negative consequence of increased fuel efficiency: less gasoline will be purchased so without a gas tax increase, revenue from this source falls. This might call for some new ways to derive tax revenue from driving. How about more tolls? Or taxing drivers per mile driven?

Claim: Obama wants higher gas prices. Is this necessarily bad?

Mississippi Governor Haley Barbour (a rumored Republican presidential candidate) suggested today that Obama wants higher gas prices:

Barbour…accused the Obama administration Wednesday of favoring a run-up in gas prices to prod consumers to buy more fuel-efficient cars…

Barbour cited 2008 comments from Steven Chu, now President Barack Obama’s energy secretary, that a gradual increase in gasoline taxes could coax consumers into dumping their gas-guzzlers and finding homes closer to where they work. Chu, then a Nobel Prize-winning professor, argued that higher costs per gallon could force investments in alternative fuels and spur cleaner energy sources.

Barbour said Obama’s energy team wouldn’t be happy until gas prices reached $9 a gallon.

Barbour goes on to say that there are two primary negative consequences of higher gas prices: it hurts workers and it hurts the larger economy. In a troubled economic period, Barbour is suggesting that Obama is willing to risk a prolonged economic crisis in order to promote things like electric cars and clean energy.

But this is really a larger issue and affects multiple dimensions of American life. Let’s assume that raising gas prices cuts down on driving and gas consumption overall – and there is evidence to back this up. There could be some benefits to this:

1. This would limit our dependence on foreign nations for  oil. What has happened in the Middle East in recent weeks can have an impact on our economy because we import so much oil. Some have gone so far as to say that this is a “national security issue.”

2. Using less gasoline would lead to lower levels of pollution.

3. Having more expensive gasoline may reign in sprawl, or at least make living in denser areas (cities or denser suburbs) more attractive. (See an example of this argument here.) In the long run, higher gas prices could be viewed by some as a threat (or by some as a welcome deterrent) to the sprawling suburban lifestyle that many Americans have adopted  since the end of World War II. Higher fuel prices would likely impact driving trips, fast-food restaurants, and trucking costs, all key pieces to the typical suburban lifestyle. One could argue that the American lifestyle of the last 65 years has been made possible by relatively cheap gasoline – and life would change if it was consistently at European price levels.

There could be other impacts as well including more walking and bicycling (cheaper, less pollution, better for health) and less time wasted due to traffic and congestion.

It bears watching how this rhetoric over gas prices continues. Is it simply a matter of a short-term (lower prices to help the economy) vs. a long-term perspective (higher prices help limit some negative consequences of driving) or could this turn into a debate about how driving (and cheap gasoline) is closely linked to the essence of American life?