Thursday, March 11, 2010

Mileage User Fee vs. Gas Tax

Recently, Americans have turned to buying more fuel-efficient cars and like most things “green,” the state of Oregon was on the forefront of this movement. A consequence of the use of more fuel-efficient vehicles is a relative decrease in revenue collected from the gas tax per mile. In Oregon average miles traveled is up 19 percent but the total revenue collected from the gas tax has only increased by 3 percent in the past five years. Since the number of vehicle miles traveled has risen faster then the amount of revenue collected from the gas tax ODOT is struggling to fund necessary road construction.

The proposed solution to this problem is to charge per miles traveled instead of per gallon of gasoline purchased. This is being considered nationally, according to the L.A. Times, Oregon is not the only state looking for a change, “several other states, including Ohio, Pennsylvania, Colorado, Florida, Rhode Island, Minnesota and Texas, have also expressed an interest in phasing out the gas tax in favor of charging motorists for how much they drive.”

The State of Oregon administered a pilot program to test the feasibility of this approach to revenue collection. 300 volunteers tested the program; the state attached GPS trackers to the volunteer’s cars to track their mileage (only in state mileage was tracked). 1.2 cents per mile traveled was charged and the pilot project found that charging per mile vs. per gallon would generate more revenue for the DOT. The tipping point was automobiles that got more then 20 miles to the gallon paid more in user fees for mileage traveled then they would have with the gas tax.

The mileage user fee is extremely controversial. Here are some pros and cons:

  • It may be more equitable as those who can afford to buy more fuel-efficient cars typically have more income or wealth.
  • It was be more fair and representative of the actual cost of driving, people who drive more and use the roads more pay more for road repairs.
  • It may get more people to use alternative forms of transportation.

  • It removes an advantage to people who chose to buy or drive more fuel-efficient cars and disincentives fuel efficiency.
  • There may be privacy issues with the GPS tracking system if the GPS collects too much information. However, if it doesn’t collect enough information there may be no way to track the misinformation a malfunctioned gps tracker.

For more information watch this PBS Special:
October 16th, 2009: The Newshour with Jim Lehrer: Video: A Tax on Miles Not Gas


  1. I think a VMT tax makes alot of sense, as it creates an ideal relationship between tax paid and benefit received. One way to address the first "con" that you raised is to keep the gas tax in place while implementing a VMT tax on top of it. That way there is still an incentive to drive fuel efficient vehicles, but also a tax based purely on miles driven.

  2. Jacobean --

    This is a terrific idea. We are working on a related project, in which I recommend that we turn to VMT for transportation while keeping some sort of gas tax (at current or lower level) for environmental purposes.