Straight talk on gas tax: Vehicle miles fee a better approach?

150 150 Rick Bishop

(photo credit: Matthew Grant Anson)

A few years I wrote about the need to raise the gas tax, primarily citing the rather obvious fact that state and federal taxes on gasoline have remained stagnant for more than 20 years (much like the Cleveland Browns), while costs for constructing and maintaining roadways have not. Relying on gas tax revenues has become an antiquated approach because it banks on a declining revenue stream due to improved fuel efficiencies of today’s vehicles.

That’s a problem, because revenues coming from the gas tax is diminishing, while at the same time an increasing number of vehicles are using – and impacting – the roadways. According to recent numbers from the Federal Highway Administration, vehicle miles traveled (VMT) increased in 2012 and 2013, after a few recession-induced decline years. Increased VMT translates to greater impacts on, and financial burdens to maintain, existing roads. SCAG estimates that truck traffic alone will exceed 50 million annual miles by 2035, compared to just 23 million miles in 2003.

I thought that a good approach (gulp, is there really a good approach?) to raising the gas tax would be to make it a flat percentage of the cost of a gallon of gasoline – say 10 percent on every gallon for example. This would collect 20 cents on $2 gas, 40 cents on $4 gas, 60 cents on $6 gas, and so on. This approach would better allow governments to collect taxes on gasoline in amounts that reflect the actual costs of oil, which is necessary because the cost of oil is directly tied to the actual costs of asphalt, a needed ingredient for road maintenance.

But the gas tax still focuses on an increasingly less-utilized resource (gasoline) as the primary means to generating revenues. If that’s not a big enough problem, consider the strong reluctance among the public and lawmakers to raise gasoline taxes; again, the tax has not been increased by even a penny for more than two decades. For these reasons, ditching the “raise the gas tax” issue is kind of a no-brainer.

Still, we need to do something. California cannot continue to depend on the gasoline taxes’ diminishing revenue stream for expanding the transportation system, much less even maintaining it. We need billions more from the gas tax than we are getting, and without adequate funding the state’s road network, a lifeblood of California’s economy, will continue to deteriorate.

Enter an interesting alternative to the gasoline tax: a VMT fee, defined as a distance-based fee levied on a vehicle user for use of a defined road system. (This may be a good time for you to pause, gasp and moan, but then please continue reading). Here’s why a VMT fee makes some sense. Foremost, it essentially solves the gas tax’s primary drawback, namely a reliance on gas consumption at a time when vehicles are becoming more and more fuel efficient (or increasingly do not use petroleum at all for power but still impact the road system). A VMT fee restores some equity by ensuring that all pay, regardless of fuel choice, because vehicles impact the road system regardless of which fuel is used.

Many experts view a VMT fee as a long-term solution; the National Surface Transportation Policy and Revenue Study Commission and the National Surface Transportation Infrastructure Financing Commission are on record endorsing a shift to a VMT fee over time. Granted, a VMT fee is looked at suspiciously by many, as it would, in a most basic fashion, require tracking vehicles, and now we’ve got the “Big Brother” thing to deal with.

Interestingly, Oregon’s Department of Transportation has been working on the issue for years as part of a limited, voluntary VMT pilot underway there, and is examining options such as a flat fee that could eliminate tracking as the only choice. They are also working to address issues regarding fairness, equity, privacy, choice, security, cost effectiveness, and revenue sustainability. California might be able to learn much from Oregon’s work.

In California, SB 1077 (DeSaulnier) would authorize the Department of Motor Vehicles to develop a pilot program to assess the use of a VMT charge in California, including an assessment of methods of calculating mileage, to processes for transmitting data and ensuring privacy, to types of equipment (including advantages and disadvantages of each). The pilot would begin by July 1, 2015, and a report would be due to the Legislature a year later with recommendations.

From the simple standpoint of looking at alternatives that can provide a sustainable revenue source for transportation, a pilot study as envisioned by SB 1077 is worth pursuing. Perhaps as important is the need to develop a strong educational component regarding existing funding mechanisms for transportation infrastructure – like the gasoline tax – that can clearly convey to the public the increasing problem being caused by this particular diminishing revenue source.

It’s a hot-button issue, and for that reason Policy-makers are going to need to be able to articulate the benefits for a shift away from a gas tax to a VMT fee or assessment.

Absent that, any VMT fee proposal simply runs out of gas.

Rick Bishop is Executive Director of the Western Riverside Council of Governments.


Rick Bishop

All stories by: Rick Bishop