Monday, March 23, 2015

Editorial: Gas tax or mileage tax?

A couple of weeks ago, the state of Oregon, once the pioneer of the user pay principle as the first state to institute a gas tax, announced plans to trial a mileage tax option for its residents. 5,000 volunteers will have the opportunity to test out OreGo, the state's new mileage tax program that will charge drivers 1.5 cents for every mile driven. Those users will receive a monthly bill for their mileage driven and receive a refund of gas taxes already paid.

In principle, this idea of a mileage tax makes sense for several reasons.

One, our cars have gotten increasingly efficient. Your high volume sale family sedan these days gets miles per gallon in the low 20s in the city and low 30s on the highway. Even among entry luxury cars, it is not uncommon to see over 30 mpg these days for highway mileage. That reduction in fuel consumption has led to a significant reduction in the collection of gas taxes, which have not increased proportionally with the increase in fuel economy; a fact that has led to significant reductions in the upkeep, maintenance, and construction of new roads.

Two, the introduction of plug-in hybrids and battery electric vehicles, which use absolutely no electricity, allow those users to dramatically reduce, or in the case of BEVs completely skirt, the payment of gasoline taxes. While the reduction in gasoline consumption is good for the environment, it does so at the detriment to the roads. That is not to say that BEV owners do not contribute at all, as they still pay other taxes and the usual registration fees, but their usage is not contributing proportionally to the funds needed to maintain the roads. As a BEV owner, I am certainly not averse to the idea of paying my fair share, especially since my vehicle still weighs a rather portly 3,600 pounds.

Three, mileage taxes would allow us to reset the expectations around road usage and if priced correctly, might actually serve as a way to encourage the use of alternative transportation. Since the current gasoline tax has not increased significantly since its introduction, phasing in a new way to cover the costs while subtly adjusting for the discrepancy in costs would allow the highway funds to be replenished and might reduce wear and tear by reducing the number of users. Many road users, especially car drivers in metropolitan areas, could easily switch to public transit or cycling for their commutes which would reduce congestion and road wear during the work week and a mileage based tax might just be the way to encourage this behavior.

Of course, OreGo is still in an early test phase and it will be a while before we see how the results actually pan out. As progressive as Oregon might be, its residents are just as wary of some of the potential privacy issues that a mileage-based taxation program might bring. That is one of the key reasons why OreGo will have options for owners on how they want to report their mileage. But at the very least, Oregon is once again taking the initial plunge and is at the forefront pioneering a new idea, that may eventually trickle out to the rest of the states. This is one experiment that we will be watching intently to see what kind of results are produced.