“Why Congress won’t raise the gas tax”

Gas prices are lower and the money is needed for highways but one writer suggests Congress is nowhere near raising the gas tax:

Fuel prices are plunging to their lowest level in years. The Highway Trust Fund is broke, and Congress faces a spring deadline to replenish it. The obvious answer—the only answer, according to many in Washington—is to raise the 18.4 cent-per-gallon gas tax, which hasn’t gone up in more than 20 years. Since prices at the pump have dropped more than a dollar per gallon in some areas, drivers would barely notice the extra nickel they’d be forced initially to pay as a result of the tax hike. That wasn’t true until recently: For years, the pocketbook punch of the Great Recession combined with gas prices that peaked above $4 made an increase both politically and economically untenable.

Yet even with prices at a four-year low, the odds of Congress touching the gas tax are as long as ever. “I think it’s too toxic and continues to be too toxic,” said Steve LaTourette, the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner. “I see no political will to get this done.”…

Advocates on and off Capitol Hill are mounting a new push to lift the gas tax as Republicans prepare to assume full control of Congress in January. Funding for the Highway Trust Fund will run out May 31. On 60 Minutes last month, officials including former Transportation Secretary Ray LaHood and former Pennsylvania Governor Ed Rendell used the specter of a major bridge or highway collapse to warn of the need for new investments. LaHood, a Republican who was once rebuked by the Obama White House for suggesting a switch to a mileage-based tax, is now going public on the gas tax, in his typically colorful style. “The best argument for doing it is is that America is one big pothole,” he told me in a phone interview, “and America’s infrastructure is in the worst shape that we’ve seen in decades.”…

In a separate interview, Blumenauer said the administration had recently “dialed back” its opposition, with senior officials telling lawmakers that if Congress could somehow pass a gas tax hike, he would sign it. Yet just a few hours after his and Petri’s press conference, Obama himself seemed to put their plan back on ice. At a business roundtable at the White House, FedEx CEO Frederick Smith asked Obama why Congress couldn’t just raise the gas tax and solve the infrastructure problem. “In fairness to members of Congress, votes on the gas tax are really tough,” the president replied, after first chuckling that if it he were in charge on Capitol Hill, “I probably already would have done it.”

It sounds like Congress thinks that such a move would be very unpopular. Americans like driving (even if they have cut back in recent years), prefer cheaper gas, believe the country is still experiencing tough economic times, and many don’t want to personally pay more in taxes. Yet, it makes some sense that highways should be funded by the gas tax: if you use the highways and associated infrastructure, you should help bear some of the cost.

Is Congress responsible for this or the American people? The article suggests Congress won’t act but Congress suggests the American people wouldn’t want it. Are both groups pretty blind to infrastructure needs or long-term investments? In the short-term, few people want to pay the necessary costs but no one will like it if the situation becomes dire.

Illinois gas tax receipts down $380 million between 2007 and 2014

Going green for transportation is good but it does hurt gas tax receipts:

In 2007, Illinois collected $1.59 billion in gas tax receipts, according to a Chicago Metropolitan Agency for Planning analysis of Illinois Department of Transportation data adjusted to 2014 dollars. In 2013, that had ticked down 24 percent, to $1.21 billion, adjusted to 2014 dollars.

One reason: People are driving less. Vehicle miles driven per capita on Illinois roads has fallen 6.5 percent since its peak in 2004, according to Federal Highway Administration and Census Bureau data. The recession was a factor, but studies suggest that the change in driving habits is likely to stick, particularly among younger people who socialize via technology rather than driving.

Those who do drive also are using less gasoline. So far, government analysts say that’s not a huge factor in driving down gas tax revenue. But with new government standards expected to boost average fuel efficiency of new vehicles from 29.7 miles per gallon to 49.6 miles per gallon in 2025, such improvements in fuel efficiencies are expected to increasingly tamp down gas tax revenue.

At the same time, more people are turning to vehicles fueled by electricity or natural gas or are opting for other forms of transportation. Nationwide, bike commuting grew 61 percent from 2000 to 2012.

Chicago more than doubled its rate of bicycle commuting from 2000 to 2012, according to the Census Bureau. Half a percent biked in 2000 versus 1.3 percent in 2012…

The changes in how people are traveling is not good news for Illinois’ crumbling infrastructure. Illinois received a C- rating on the 2014 infrastructure report card from the American Society of Civil Engineers. For roads, the state got a D+, with the society claiming that 42 percent of Illinois’ major roads are in “poor or mediocre condition.”

Taxing gasoline is not a “sin tax” in the same way as taxing cigarettes but the concept is the same: to ensure a steady flow of revenue, consumption has to stay the same (and even then inflation eats away at this) or increase.

I haven’t heard much lately about taxes based on miles-driven rather than gas consumption. But, the article notes that it appears Congress isn’t going to address the issue so we may end up with a bunch of different regulations as states and municipalities look for ways to replenish these funds.

Oregon to adopt driving tax by miles driven on volunteer basis in 2015

Oregon is moving ahead with plans to institute a miles driven tax rather than a gasoline tax:

The program, springing out of a recently signed bill, is expected to launch in 2015 on a volunteer basis. But it’s charting relatively new territory, and other states aching for additional tax revenue are sure to be watching closely to see whether to imitate the model…

Oregon is purportedly considering several tracking methods for the pilot project’s 5,000 volunteers ahead of the 2015 start date – essentially allowing them to install mileage meters connected their vehicles’ odometers or GPS systems that could better track non-taxable miles on private and out-of-state roads…

A state spokeswoman said Monday that the project is still in the development stages with officials focused on public awareness, not registration.

Still, she acknowledge residents with electric cars, who pay no gas taxes, “won’t be running to sign up.”

As the article suggests, this is likely to be unpopular for a number of reasons including cost and privacy. However, I haven’t seen any other proposals for how to continue to maintain roads if cars continue to be more fuel efficient. Another option would be to raise the gas tax but no one would like that either. The roads have to be paid for somehow.

Perhaps the key would be to show people that they would be paying a similar amount through the gas tax or the miles driven tax. If the numbers are comparable for many people, it is just replacing one tax with another rather than adding on a new tax. But, the two taxes are based on two different things.

Argument for a flat tax for both electric and gas drivers

There is ongoing discussion in several states about a flat tax for electric and gas cars per mile driven:

“EV drivers want to pay their fair share,” says Jay Friedland, the legislative director of Plug-In America. “We want the roads to be supported, but we’re still in a phase of early adoption and there’s a greater public good.”

That “greater good” is to give electric vehicle technology a chance to crack through its niche status, reducing the continued reliance on fossil fuels from unstable nations. The more state and federal breaks EVs get, the greater the possibility that drivers will look to them as an alternative. But they still need to contribute to the greater good of roads and infrastructure, and Plug-In America agrees.

The advocacy group believes a flat road tax is a better solution – taxing all drivers equally, no matter how their vehicle is powered. That idea is gaining momentum.

In New Jersey, a road tax proposed by Sen. James Whelan, a Democrat from Atlantic City, would charge all drivers 0.00839 cents per mile driven. For the average driver who travels 12,000 miles per year, that comes to a little more than $100. It’s an easy way for Jersey to recoup some cash from EV drivers without targeting them directly.

It’s the same idea with Virginia’s HB 2313, which eliminates the $0.175/gallon tax on fuels in favor of a tax of 3.5 percent for gasoline and six percent for diesel fuel, while imposing larger annual registration fees and a $64 per year for EVs, hybrids and alt-fuel vehicles.

There seem to be several competing interests in these discussions:

1. States who desperately need money to pay for roads.

2. Advocates of electric vehicles who don’t want new taxes and fees to limit the adoption of electric vehicles.

3. Where are the gasoline drivers and the trucking industries? There has not been much reporting on their status in these ongoing discussions…

Another factor that makes these conversations more difficult is the potential changing nature of driving in the coming years. States need certain levels of funding for roads but it is unclear how many people will be driving what and what the status of miles driven per capita will be down the road. All of this means it is harder to make projections and also suggests that whatever is decided in the near future will probably have to be revisited soon.

Oregon testing out five different ways to pay vehicle-miles traveled tax

The state of Oregon is currently running a small test program with five different ways of paying a vehicle-miles driven tax:

The new usage charge pilot program, which began in November and runs through the end of this month, involves about 40 volunteers from state government. Participants chose the tracking plan that best fit their privacy tastes and will pay 1.56 cents for each mile driven — receiving a credit for any gas tax paid during the test period. The idea is to make sure each tracking option works in practice…

The five tracking plans vary in terms of oversight. Two are managed by the Oregon D.O.T., three by a third-party vendor. They also vary in terms of payment: some require setting up an online account tied to credit or debit information, others go the old fashion route of monthly bills payable by check.

The key difference is the tracking system. Two advanced plans track mileage data as well as movement with a G.P.S.; the advantage here is that users aren’t charged a fee for driving on private or out-of-state roads — only public roads in Oregon. Two basic plans involve an odometer-type device that collects mileage data but has no G.P.S. to track movement. Users may end up paying a little more, but they’re getting privacy in return.

The most primitive plan, for people who want the most privacy, uses no tracking device at all. Users pre-pay a flat fee that assumes a monthly mileage. At some point, say when the car gets official inspections, the odometer is checked and the difference between miles paid and miles driven is reconciled…

Despite these cautions, Oregon is preparing to take its system public soon. The state legislature has prepared a bill that would implement a V.M.T. fee on all vehicles getting 55 miles per gallon or better. (The change only applies to car models beginning in 2015, however, and as currently written the law wouldn’t go into effect until that year.) Olson says the bill will be introduced sometime in 2013.

It sounds like this small test is more about finding about which of the five options are doable and/or appealing, mainly on the dimension of privacy, rather than asking whether a vehicles miles tax should be implemented at all. As the article notes, a bill will come up this year to start the ball rolling. If this is the case, why not run a test bigger than 40 state employees?

Another thought: the system is set up so that drivers only pay for driving on Oregon’s public roads. Wouldn’t a comprehensive system of driving tax collection have to account for driving in other states?

Broke highway fund might mean up to 250% increase in pay-per-mile tax

Here is more grist for the rumor mills about a pay-per-mile driving tax: a new GAO report suggests the tax will need to be increased from current levels.

An on-again, off-again move by the Obama administration to scrap the federal gas tax in favor of a pay-per-mile fee would boost the tab to Americans as high as 250 percent, raising their current tax of 18.4 cents a gallon to as high as 46 cents, according to a new government study.

But without a tax increase, said the Government Accountability Office study, the government’s highway fund is going to go dry. One reason the fund is going broke: President Obama’s push for fuel efficient cars has resulted in better mileage, and fewer stops at the pump.

The GAO study is just the latest review of federal spending that paints a grim picture of the nation’s infrastructure. Just keeping spending at current levels, the GAO said, would require a near doubling of the gas tax to 32 cents a gallon, and that would jump to as high as 46 cents should the federal government add spending to fix crumbling infrastructure and build new roads.

The average driver pays about $96 a year in federal gas taxes, said GAO. Should the administration seek to raise the highway trust fund from $34 billion to the $78 billion needed to fix and maintain roads, that could rise to $248. Translated into a pay-per-mile plan, drivers would face a tax of 2.2 cents per mile compared to the 0.9 cents they pay now. Trucks would pay far more.

Infrastructure and driving are not cheap. I imagine this might easily be the most unpopular tax in years even with its relatively small impact on individual drivers. How can the federal government make driving, a necessity in America due to our planning and past policies plus a favorite activity of Americans for decades, more expensive?

Considering replacing the gas tax with a tax per mile driven or a flat fee for electric vehicles

Here is a recap of efforts to replace the gasoline tax and the relatively less revenue collected because the federal gas tax hasn’t risen in years and the future decrease in gas consumption with more hybrids, electric cars, and fuel-efficient vehicles:

The favored answer of road engineers? Taxing by the mile driven. A handful of states — Oregon, Minnesota and Nevada — have already tested ways to use GPS and other electronics to adjust taxes. In the Nevada and Oregon tests, drivers had devices installed on their cars that sent data to special fuel pumps; those pumps automatically adjusted their fees based on how far the vehicles had driven, without revealing data that would amount to tracking drivers.

The GAO told Congress this week it should allow a similar test on electric vehicles and commercial trucks, and estimated that a pay-by-the-mile tax of 0.9 cents to 2.2 cents per mile designed to replace fuel taxes would raise a typical driver’s costs from $98 to between $108 to $248.

But it’s not the only answer to filling this financial sinkhole. Washington state lawmakers have put a flat fee of $100 a year on electric vehicles to make up for the gas taxes they don’t generate, and Oregon lawmakers may follow suit. In Virgina, Gov. Bob McDonald has proposed abolishing the gas tax entirely, replacing it with a sales tax and a new $100 fee on “alternative fuel” cars and trucks. That idea has already drawn fire from critics who point out that it would make Virginians who never drive pay for roads while letting people who travel through the state do so for free.

I’ve covered the proposals in some of these states earlier (see here) but I haven’t heard of the electric car flat fee. I imagine a flat fee will not be specific enough to target electric cars – why not just go by a reduced mile-driven rate as well to account for all of the roads being used?

I suspect the first state to institute this will encounter lots of protests. At what point can a tax like this be implemented: before taxes start to decline or only once it is really clear that gas tax revenues aren’t enough to cover road costs? A case could be made that we are already at the second scenario and need more revenue to cover federal roads.