Increase the Gas Tax – Or Monitor Vehicle Miles Traveled?

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In the past month, for the second time in the two-and-a-half-year-old Obama Administration, discussion of a vehicle miles traveled (VMT) scheme to supplement or replace the gas tax floated up – and then disappeared rather quickly. As reported in Transportation Weekly in early May, about $300 million would be allocated in the Transportation Opportunities Act to study a VMT system. Such a miles-traveled program would charge motorists for actual use of pavement, not how much gas is being used.

“What we’re selling is road space,” Ralph Erickson, division chief of the Highway Funding & Motor Fuels office of the U.S. Department of Transportation, told Pothole.info. “It’s a valuable piece of real estate. But how do we collect a fair price on use?” Erickson said that a fairer system would also account for the weight of vehicles (i.e., as it contributes to wear and tear on pavement) and the time of day that those vehicles travel, otherwise known as congestion pricing.

But Erickson explains he is a career employee of the government, removed from the political process of such determinations. He pointed us in the direction of several elected members of the House and Senate who chair committees that hold sway over laws and funding of surface transportation. Getting senators and congress people (or their staffs) to talk about VMT proposals, however, proved to be much more difficult.

The problem with the gas tax

As richly detailed here on Pothole.info, the primary source of funding for building and maintaining highways and bridges is the federal gas tax, which is 18.4 cents per gallon. Diesel fuel, typically used by trucks that arguably put a greater strain on roads, is taxed at 24.4 cents per gallon, and other miscellaneous items (truck tires, truck and trailer sales, heavy vehicles, and special fuels such as liquefied petroleum gas) are taxed as well. States and counties add to this tax, on average an additional 29.3 cents per gallon, to cover local funding (mostly to cover infrastructure expenses). The federal gas and miscellaneous taxes are what makes up the federal Highway Trust Fund (HTF).

Already, the HTF falls short in what is needed to maintain highways and bridges. The tax is indexed to gasoline volume, not price, and that tax was last raised in 1993. So it fails to keep up with inflation. Add to that the not-so-small matter of vehicle fuel-use efficiency. A Prius getting 50 miles per gallon of gas is paying a lot less into the HTF than is a Cadillac Escalade, which gets 13-18 mpg.

The American Association of State Highway and Transportation Officials (AASHTO), a diverse group whose world is defined by road quality (and, we assume, fielding complaints about potholes on a daily basis), says that because of the HTF structure that highway funding is in no less than a crisis. In a 2009 report (Rough Roads Ahead, Fix Them Now or Pay For Them Later), AASHTO points out how the current spending on surface transportation is about $90 billion per year, when a more effective maintenance expenditure would be closer to $166 billion.

In case that just looks like numbers from a chart, it helps to think instead of the implications. Bridges are not being fixed as quickly and thoroughly as they should be. Highways are not getting preventive maintenance even though they are getting older by the day. And potholes – albeit on town and city roads, county and state highways as well as those on federally-funded interstates – cause an average of $413 in damage per year per car. If you live and drive in a city such as Los Angeles, the annual per-car cost for pothole damage is more than $700.

What’s worse, those gas tax revenues are already declining. This is due in part to the recession, which in 2009 and 2010 saw total passenger miles traveled decrease from 2008 levels, its historical peak (passenger miles traveled is a function, largely, of population increase).

But the biggest threat to gas tax revenues is neatly summarized with those two words: fuel efficiency. Hybrids and all-electric vehicles mean gas use could diminish significantly. Which is clearly a national goal, to reduce our dependence on foreign oil and the trade deficit that results (the U.S. spends $360 billion annually to import oil).

Additionally, the federal Corporate Average Fuel Economy (CAFE) mandates for fuel efficiency in new cars begins a phased-in increase from 2012 through 2016.

Our national policy to cut the use of petroleum is in direct conflict with our need to repair and improve roads. How will the potholes get fixed such that cars can truly achieve higher fuel efficiency?

Would vehicle miles traveled (VMT) be the solution?

It is not as if no one saw this coming. The math is rather obvious. The roads are getting older, the U.S. population is increasing (which is directly proportional to increased traffic) – and yet the money for fixing the roads and building new ones is declining in absolute and inflation-adjusted dollars.

“It’s definitely being studied,” says Erickson. “What we say around here [at the U.S. DOT] is, ‘between now and George Jetson, how do we get there?’” Given the political and logistical complexities of creating a new revenue structure that affects every living American – and the mounting pothole problem – space-age personal aircraft certainly looks attractive. He says that as they study alternative methods of connecting users of roads to the cost of maintenance, they ask two questions:

  1. How would a new and different revenue-generating program work?
  1. What would be the net effects of a new program?

One such program that has been tested in Oregon and Iowa has been a vehicle miles traveled (VMT) scheme. In broad brushstrokes, it logically meets the way Erickson positioned fairness in who pays for the road. If you “consume” roads as you would any other good or service, it makes sense that you would pay for it by volume.

The Pittsburgh Post-Gazette opined about these tests in 2009, “A vision of the future has emerged from pilot projects in Oregon and Iowa. Both point to a day when motorists will be taxed based on miles driven, the size and fuel efficiency of their cars, and how many of those miles were traveled on chronically congested highways or at peak rush times – all made possible by onboard tracking devices that use Global Positioning System technology.”

Oh, but the problems. While Erickson claims the Oregon and Iowa tests were deemed successful, it should be noted that both involved the use of volunteers, people who self-select as interested in such a program. We can assume the inconveniences of monitoring devices were things they put up with in the interest of research.

A third plan, reported by the Reuters news agency (5/11/11), would create a “federal reserve of infrastructure.” Instead of Congress earmarking bills to provide funding for home-state road and bridge projects, those projects would be awarded through a non-political competitive bid process, and winning states could leverage their dollars to attract private capital. This could increase funding overall. But removing the power of the purse from elected officials looks like a tough go.

No and yes on a VMT plan

With the mere suggestion of a VMT program in Washington, it isn’t hard to find strong opinions, for and against. Here are some of the things written about the VMT concept in 2011:

Rep. (R-MO) Sam Graves (in a letter to President Obama, Sen. Claire McCaskill and Sen. Roy Blunt)

All of you disgust me, when is enough, enough?

Yes, eventually government will have to come up with a sensible replacement for the revenue stream of gasoline taxes as more and more Electric Vehicles (EVs) hit the roads and do not use gasoline, the traditional source of the “use tax” to pay for roads.  But could we find a way to do it which does not involve the government “riding shotgun” with us in the car.

Too many avenues for abuse there; and I’m a bit surprised by the silence on the traditional civil rights groups in this discussion.

Rep. (R-FL) John Mica, Chair, House Transportation & Infrastructure (to TheHill.com, 5/5/11)

Even an increase in gas taxes now will not solve the problem,” Mica said. “Every day, the fleet is getting more efficient. They’re literally driving further and paying less, so the system will collapse.

But The Hill reports, “Even before Republicans took control of the House in 2010 on an anti-government wave, Mica said the tax-per-mile proposal would be a tough sell to voters.”

They’ll be coming with pitchforks up the Capitol steps, Mica previously told the newspaper.
Bengt Halvorson (The Car Connection 5/5/11)

The plan would probably yield more highway funds and would be a more stable answer to concerns that, as consumers move to more fuel-efficient vehicles (and, perhaps, electric cars), available highway funds will become progressively tighter. Raising the current federal 18.4-cent-per-gallon gas tax would be a political non-starter, so a new pay-per-mile method appears to be one scenario that would keep the highway funds flowing. There are a number of arguments against a pay-per-mile system, however; one is that those heavier, less fuel-efficient vehicles would then pay just as much as those with lighter vehicles—even though the heavier ones would put more wear on the roadways.

Rick Ferri (Forbes, 5/5/11)

I believe VMT should be called the Rube Goldberg Gas Tax because while its objective is the same as the gas tax, the way it collects revenue is extremely complex, costly and cumbersome. It’s understandable that the administration wishes to avoid the stigma of increasing gas prices when the price of gas is about $4 per gallon, but VMT is so close to a gas tax that it’s going to be called that anyway.

VMT calculation and payment would take place electronically every time you buy gas at the pump. Buying and maintaining the equipment would undoubtedly be at a cost to service stations and vehicle owners, and non-compliance will likely result in hefty fines.

The administration’s answer to falling federal revenue from lower energy use should be higher energy taxes. This encourages even less energy use, which is in line with our national energy policy, and it maintains revenues without creating more forms of federal taxation.

Where it stands now

Aside from the commentariat, there is little word from Washington on what is actually being proposed in the Transportation Opportunities Act. Speaking only on background, a spokesperson from the Department of Transportation said this:

The Obama Administration does not support a vehicle mileage tax or VMT.

Further, we have not released a legislative proposal, and this is not an administration proposal.  This is not a bill supported by the administration. This was an early working draft proposal that was never formally circulated within the administration, does not taken into account the advice of the president’s senior advisers, economic team or Cabinet officials, and does not represent the views of the president.

OK then. So we next tried reaching members of Congress who are on surface transportation committees – Senator (D-CA) Barbara Boxer (Environment & Public Works), Senator (D-WV) Jay Rockefeller (Commerce, Science & Transportation), Senator (D-NJ) Frank Lautenberg (Commerce, Science & Transportation, and Surface Transportation and Merchant Marine Infrastructure, Safety and Security) and Rep. (R-FL) John Mica (Transportation & Infrastructure) – and left several messages, to no response. This is more than political football. It’s political football in a lockout season.

So as we speak, the roads are deteriorating, funding sources are drying up, and there are no solutions being put on the table. Some of the roads we use today were built in 1961, when a newly-elected U.S. president had this to say about highway funding:

“We ought to pay our own way and leave future revenue sources available to meet future needs.”

John F. Kennedy
Special Message to Congress on Highways
-February 28, 1961