Tax Analysts Blog

Forget Privacy -- It's Time to Tax Miles, Not Gas

Posted on Oct 14, 2014

We ask a lot of the gas tax. We expect it to build new roads, keep our bridges from falling down, and fund a variety of public transit projects. As if that weren’t enough, we also want it to clean up the world, discourage fuel consumption, and curb air pollution. All these goals are related, of course, but not always in a helpful or consistent manner. It’s time to find a better way.

When it comes to funding infrastructure, the federal gas tax is failing. For decades, the levy raised enough money to pay for innumerable surface transportation projects, including the interstate highway system. But since 2007, it’s been falling short. So short, in fact, that the federal Highway Trust Fund is constantly on the brink of exhaustion.

Three factors explain the failure of the gas tax. First, road building has gotten more expensive. Over the past 20 years, construction costs have risen by more than 50 percent. Second, Americans have been buying less fuel because their cars are getting better mileage. Third (and most important), Congress hasn’t raised the gas tax in more than two decades. Currently, gas is taxed at 18.4 cents per gallon and diesel at 24.4 cents, just like they were in 1993.

This suggests a stunningly obvious solution to our current problems: Just raise the tax! And indeed, plenty of people have suggested just that, not all of them big-spending liberals. Business groups in particular have been pleading for an increase for years, and some traditionally antitax Republicans have been receptive. Currently, one of the leading proposals for fixing the trust fund is cosponsored by Tennessee’s GOP senator, Bob Corker.

Still, politics have managed to get in the way of sensible solutions. Corker doesn’t enjoy much company in his caucus when it comes to raising the gas tax, and even many Democrats are wary of raising a tax that plenty of voters truly detest. As Rep. Earl Blumenauer remarked to The Washington Post in July, “Gasoline is the only product that we price in real time. The typical American sees the price of gasoline about five to 20 times a day.” That makes for a lot of price – and tax – sensitivity.

Nevertheless, raising the gas tax is a good idea. It’s a short-term fix to an immediate problem. But it should really be the first step in a longer process of revamping the way we pay for transportation infrastructure. For almost 100 years, lawmakers across the nation have treated gas taxes as a user fee; since fuel consumption was roughly correlated with road usage, gas taxes were a good way to ask drivers to pay for the roads they needed.

But that rough correlation gets rougher all the time, thanks to mileage improvements. If we want to keep paying for roads with a user fee, we need to find a new way to measure use. Improving fuel efficiency is a great and wonderful thing, but hybrid drivers are still using the roads. In fact, to the extent that they pay less to drive each mile, they may even be using roads more than people driving traditional gas-powered vehicles.

To better correlate road use with tax payments, lawmakers should consider some sort of vehicle miles traveled (VMT) tax. The levy would presumably be administered by installing a GPS device on vehicles, which would allow tax authorities to easily calculate taxes due. The levy might be assessed at a flat rate, or it could also be imposed with variable rates depending on vehicle weight or other factors.

This sort of levy is not without its own problems. To my mind, the biggest hurdle is political: It’s hard to imagine that Americans will be happy about giving the feds 24-7 information on their whereabouts. The Congressional Research Service came to a similar conclusion, quoting a 2009 Florida newspaper editorial to make the point:

      It’s not the government’s business to know about everyone’s whereabouts. A VMT pilot program in South Florida will use a tracking device to log drivers’ mileage. Impose the VMT, and Big Brother, for all intents and purposes, will be in the back seat. Tracking your comings and goings isn’t akin to installing cameras at intersections to catch red-light-runners who threaten anyone’s safety, an effective measure we heartily endorse that saves lives. It’s a gratuitous intrusion into drivers’ lives. And an intrusion that policymakers need to steer clear of.

I sympathize. But truth be told, Americans already tolerate plenty of privacy intrusions. In particular, they routinely provide location information to both government agencies (through their E-ZPass devices, for instance) as well as private companies. Google certainly knows a lot about our driving habits, and cellphone companies are privy to almost all our darkest secrets.

I don’t particularly trust the government with my private data (thanks for the heads-up, Edward Snowden). But then neither do I trust private-sector snoopers – especially since the latter have a strong profit motive to ignore my privacy concerns.

But ultimately, privacy may be an anachronism—a quaint memory from our childhood, like Howard Johnson’s restaurants. We can wish for an earlier age of liberty, freedom, and highway anonymity. But there’s no turning back the clock. Realistically, we should spend our time figuring out how to live with a loss of privacy, not wishing for a bygone era.

The gas tax has had a pretty good run. But it was built for a different age, when electricity was for light bulbs, not Lamborghinis. It’s time to find a new, more effective revenue tool for our energy-sipping future – something like the VMT tax.

Read Comments (6)

edmund dantesOct 13, 2014

Mr. Thorndike, you have omitted the number one reason that the gas tax is falling short, just as your colleague Mr. Sullivan did earlier. That is, the funds from the gas tax have been systematically diverted--stolen, if you will--for non-road uses, such as mass transit, bike paths and the like. If we simply allocate 100% of the gas tax revenues to roads and bridges--true user fees--we have plenty of funding. Here's my source.

If the Heritage paper is not accurate, please explain how?

Installing a GPS is an utterly terrible idea, one that would be abused by the government almost immediately. No doubt, they'd start automatically sending speeding tickets. This would be far more pernicious than those red-light cameras being used inappropriately as new revenue sources.

The current system incentivizes and rewards a shift to higher mileage cars, which is a good thing. Better to use such carrots than the stick of regulations and penalties.

AMT buffOct 13, 2014

A fuel tax is a poor proxy for the amount of damage inflicted on the road by
one's use of a vehicle, but it's a better proxy than miles traveled. Heavier
vehicles cause more damage. They also use more fuel per mile and therefore pay
more tax per mile.

Dantes is right that speeding tickets would be the next step. I believe that
for some proponents that possibility is the primary reason to advocate a VMT
tax. It's always about controlling the stupid "masses" for their own good.

vivian darkbloomOct 14, 2014

"When it comes to funding infrastructure, the federal gas tax is failing. For decades, the levy raised enough money to pay for innumerable surface transportation projects, including the interstate highway system...

Three factors explain the failure of the gas tax."

I'd suggest a fourth factor, but I'm sure there are many more. This one is not new and it has nothing to do with the tax.

Rather than focus solely, as here, on the gas tax revenue side, perhaps we should also look at the highway spending side.

The Davis-Bacon Act was passed in 1931. The purpose of the act was to protect local (white) union labor from encroaching cheaper African American labor from the south. Initially, that act did not apply to federal grant programs. But, in 1956, it was expanded to apply to the interstate highway system.

A nice history can be found here at the Dept of Transportation site.

It has been estimated that the cost of federal construction projects, including roads and bridges, is 10 percent higher than it otherwise would be because of Davis Bacon.

Repealing Davis Bacon is not going to solve the highway funding problem; however, it might help to solve this and other problems if we were to enact a bill mandating that in evaluating any deficit between revenues and expenditures we not only reflexively point to ostensible "revenue shortfalls", but also to "spending overshoots". This problem, like so many others, should be attacked from *both* sides of the "income" statement.

Regarding the privacy issue, I guess the Thorndike prescription is "if you can't beat them, join them". I don't think that's the right approach to the
privacy incursion problem.

david brunoriOct 14, 2014

Joe, I have to say, Edmund and the AMT guy are right. In the states the gas tax
is often diverted to subways, airports, and other transportation activities
unrelated to the roads.

But I am really writing to express disagreement with your assertion that we
forget privacy. Gone the way of Howard Johnson's? Snowden proved that what we
need is a privacy counter revolution. Still, I admit the EZ pass has made life
a lot easier.

Joe ThorndikeOct 14, 2014

Edmund, I did mention public transit (in my first sentence!) but I get your
point. That said, I think "plenty of funding" may be overstating the case. The
Heritage factsheet notes that current law authorizes "about $14 billion more in
annual spending than the HTF collects in revenue." Heritage would solve that
problem by eliminating the diversion of money to mass transit, but also by
"limit[ing] HTF spending to match available revenue." That seems to imply that
there won't be enough money to pay for currently identified spending
priorities. You may be fine with that. But many people (myself included) think
we need more infrastructure spending, not less -- even accounting for mass
transit projects (which I also support).

AMT Buff: Speeding tickets? No doubt.

More broadly, though, I guess I see that sort of enforcement enforcement as
inevitable. To address David's point, I'm not convinced that any sort of
privacy counter revolution will succeed in checking the privacy compromises
that flow from technology. Believe me, I hope I'm wrong; I'm sympathetic to
libertarian arguments on this issue. But it all seems like wishful thinking to
me.

AMT buffOct 15, 2014

Joe, one hopeful sign is that red light cameras are being removed in many
cities. It's not clear whether this is due to citizen outrage or lack of
profit.

If a law is to be enforced robotically, that law had better be something that
99% of the public supports and would conform to even if it weren't required.
Speed laws fail that test miserably, which is why proponents of automated speed
enforcement advocate VMT as their Trojan Horse.

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