Now, I encourage you to read the article because it’s a little long. But the summary of it is that the federal government, in the wake of declining fuel tax revenues, is considering a mileage fee for miles driven. The article goes on to make the case that something has to increase revenue aimed at maintaining the road system in the United States and that, with the movement towards more fuel efficient cars (and non-gasoline vehicles), current gas taxes can’t be expected to do the job. The article also lays out various means by which the tracking of miles driven could be accomplished and later billed.
My response: Oy.
My initial thoughts are that it’s getting things backwards. I’ve always had deep doubts about the sustainability of the American car culture. The belief in it has led to a form of suburban development that almost seems to require isolation from the community and neighborhoods by leading to long commutes. Several years ago Lady Chance and I elected to relocate out of our ex-urban home in Washington DC to a small town with little need for driving and our participation in our community has increased an infinite amount.
In short, I find the government’s concern that revenues need to be raised to keep the current system going to miss the question of whether it should be kept going at all!
Of course, from my own personal liberty point of view I find giving the federal government the ability to track all of the movements of my car to be at least a little worrisome.
I’m also deeply doubtful about the article’s notion that this would replace the existing gasoline tax. Knowing government as I hope I do I would see this placed on top of the existing tax to enhance declining revenue.
I suppose my objections come down to a basic mistrust of government, a disagreement with the goals of the program, and strong doubts about the method of implementation.
Heck, it’s doubtful it would even hit me that much. Since I’ve been in small town America the amount of driving I do personally has dropped from about 40K per year to less than 5K. I only rack those up taking the kids to their grandparents a few times per year.
I’m against the usage fee too. I’m still not sure why we don’t raise the gas tax. It was barely addressed in the article: you raise the price of gas (via the tax in this case) and people drive less. So what? That may mean less revenue, but gas demand is reasonably inelastic, as driving to work isn’t optional (personally, I live in one of those Washington DC exurbs)
Further, aren’t we also trying to control for an externality here, all that CO2 that is supposedly harming the earth? Don’t we introduce perverse incentives to go back to gas guzzling SUVs (relatively speaking) if they go to this approach?
Yes the trust fund is running dry. Yes we need new revenue streams to continue to adequately fund the infrastructure. I would think we want to encourage people to buy the new 50- and 100mpg vehicles for many reasons, not the least of which is that it could help wean us off of foreign oil.
The gas tax does all this. Raise it, if need be. The only argument I can see against doing that is its regressive nature.
The article fails to address some obvious questions:
Higher gas taxes tend to discourage driving, thus reducing tax revenue - but a per-mile tax wouldn’t? How is that?
What would be the cost of fitting millions of cars now on the road with the necessary mileage-reporting equipment?
The current system for fuel taxes seems to work well. Cost of collecting the tax appears to be quite moderate. Fuel usage is in some real sense related to the burden a vehicle places on the infrastructure: a larger and heavier vehicle does more to increase the need for road maintenance than a small, lightweight vehicle - and inherently pays more fuel tax.
In short, this scheme appears not to have any meaningful advantages that would offset its obvious cost and complexity. Set fuel taxes such that they bring in funds sufficient to get the job done.
A mileage tax is a horrible idea. It has no advantages over the gas tax, and numerous disadvantages. Most of these have already been mentioned - gas taxes are vastly easier to collect, result in a preferable incentive structure, and scale to an extent with burden placed on infrastructure. If gas tax revenues are too low, raise the rate.
I like the idea given the very limited view that anything that reduces fossil fuel consumption is good, but agree that a more direct approach like gasoline tax should do this much better.
I disagree that gas demand is inelastic. Maybe you have a fixed commute, but you have some choice about how efficient a vehicle to drive, and certainly there is much choice about extra driving and elective uses like “power sports” (motorboating, snowmobiles, etc) distributed around the marketplace even if a given person doesn’t have any leeway left on these.
As far as getting down to root causes, even better than gasoline taxes would be if the government stopped subsidizing oil in various ways. For example, I think there is a fair argument that the Middle East would not be much of a worry to the rest of the world if we did not keep pumping so much money into it, and the US would not spend as much of our various resources (which includes its citizenry) fighting wars there either. I don’t know what the reasons are that gasoline is something like three times as expensive in Europe as here, but have heard that the price they pay is more like a free market price.
The deeper point is the addiction to tax revenue, in my opinion.
Directed axes are often sold as a way of driving behaviour. “Let’s tax cigarettes; let’s tax gasoline. People will smoke less and drive more efficient cars. Isn’t that grand?”
But what happens in practice is that a whole chain of people become dependent on the money itself, and if the revenue drops they start looking for ways to increase it again, even if the behavioural change was effected.
It is not clear to me that any directed taxes make sense anyway unless they are implemented purely for the sake of driving behavioural changes. They are more often simply a mechanism to raise more tax revenue. If a state raises $100M from road-use taxes, that’s $100M the road budget is not going to get from general revenue.
No, they have absolutely massive gas taxes in Europe, which is what accounts for nearly all of the price difference. If someone is arguing that it’s closer to a fair market price, they must be saying that the externalities (pollution, burden on public infrastructure, etc) are being priced into the gas.
The gas tax began in the early 20th century, before limiting fossil fuel consumption was a concern. It wasn’t meant to drive behavior, but to charge the people who were using the roads a tax for to pay for the roads upkeep.
As to the article in the OP, I think the easiest solution is simply to use tax revenues from other sources (income, property, sales tax, etc) to replace the falling revenue from gas taxes. The original justification of the gas tax, that only people who have cars should pay for the cost of maintaining roads, is largely moot. A far larger proportion of people own cars now then in 1930, and even amongst those who don’t, most of them use them to take buses, ride bikes or at least eat food and consume other goods that are delivered by truck. It no longer seems unfair to charge the public at large for road upkeep.
I can’t believe the dumbth of this idea isn’t completely obvious. The only differences I can see between a mileage tax and simply raising gas taxes is that the former punishes fuel efficiency and is harder to implement.
In many places it is too expensive to live near one’s place of employment. Many jobs within a city are minimum wage, and there just aren’t accommodations cheap enough for many workers. So the workers commute. Some workers will choose to live away from a city because they prefer it. Others will live away from the city because they have to. Would someone driving a brand new BMW be taxed the same as someone who can only afford to drive a 1986 Chevy Sprint? It seems to me that a mileage tax would place an undue burden upon people who are not equipped to pay it. The BMW driver can decide to move closer to the office or accept the tax as a cost of living in the 'burbs. The Sprint driver has little or no choice.
If you’re going to tax usage, go one step farther and implement an actual congestion tax, which moves up and down as road congestion increases and decreases. Then you’d actually do some positive good - make the road system more efficient, minimize gridlock, and set up incentives for people to spread their work hours around and/or live closer to work. More people in highly congested areas would take mass transit. Businesses that set up in areas where there are road shortages would have to pay more for employees to compensate them for the road taxes.
But a flat per-mile tax has almost none of those features. It retains all the inefficiency of an unpriced public good, while adding the burden of mileage tracking and additional taxes.
I prefer something like a weight tax - if you drive a vehicle over a certain gross vehicle weight and you can’t prove commercial use, you get to pay for your over-consumption and under-environmental responsibility.
My understanding is when gas prices went up to $4/gallon people drove about 3-5% less. So you increase the costs of gas by $1.50/gallon and people drive 5% less. That isn’t a loss really.
People use about 140 billion gallons of gasoline and another 60 billion in diesel each year. If people collect 47 cents on each gallon that works out to about 94 billion a year in revenue.
Something as minor as doubling the tax rate by another 50 cents (and pushing gasoline up to $3.20/gallon or so) would double the revenues. Plus it would incentivize switching to alternative fuels. Every 10 cents in new fuel taxes should raise $20 billion a year.
Plus any form of tracking when/where/how much you drive is going to get abused by law enforcement agencies sooner or later.
I don’t like the idea. It treats a PHEV and scooter owner the same as a Humvee owner. It also doesn’t incentivize alternative, nonpolluting fuels and instead punishes them.
Keep increasing the fuel tax year after year to encourage switching to alternative fuels. Then when that is done, then maybe a road or mileage tax.
But you’re just dancing a few degrees of separation away from the issue.
What’re you trying to do here, economically speaking? I’m going to assume the that you’re trying to correct a market failure - specifically, the cost of pollution. (You might also be looking to reduce road usage, as Sam suggests, but your reference to pollution suggests not.)
If that’s the case, tax gasoline. Pollution’s caused by burning gasoline. The closest you’re going to get to taxing that externality is to tax gasoline. Why would you go to the confusion and inherent unfairness of taxing the WEIGHT of a vehicle? That might have absolutely nothing to do with how much fuel the vehicle burns; maybe I plan on driving by 4,000 pound vehicle just 10,000 miles a year, and you’re going to drive your 2,500 pound vehicle 40,000 miles per year.
I’m asking for reduced government spending, and better decisions about how to spend the funds available. We’re pouring billions down the ratholes known as Iraq and Afghanistan. That money could be put to much better use.
As an alternative to raising taxes or starting new ones, I propose a national lottery, with all proceeds to be used to pay off the deficit. Once we’ve done that, the money could fix social security.