Friday, February 1, 2013

Taxing Driving by the Mile

A frequent criticism of transit is that fare box revenues are far less than the operating costs.  The charge is true.  Twenty percent of operating costs is the goal for fare box revenues, but ten to fifteen percent is the more frequent reality.  Those who oppose transit and the land-use paradigm that it represents often decry this as a “subsidy”.  Perhaps it’s a fair description.

But the description ignores that automobile use receives a similar “subsidy”.  Other than the gasoline tax, which is both inadequate and poorly apportioned, we don’t pay to use public roads.

Ah-hah, some argue, we pay for our roads through our property taxes.  Well, not really.  Even if we skip over the fact that property taxes support roads in the same way that income taxes support transit, and therefore either both are the beneficiaries of subsidies or neither are, a homeowner pays the same property tax bill whether he drives 1,000 or 100,000 miles per year.  There is no supplemental charge for the extra 99,000 miles of road use.

But some will now argue that the gasoline tax is how we pay for the extra miles.  There is some truth to the argument, but less than one might think.  The gasoline tax is a proxy for road usage, but a poor one.  The federal Highway Trust Fund has been running on empty for years, forcing Congress to loan money from the general fund.  And even then, the Trust Fund is only used for road construction and maintenance.  The other costs of gasoline use, particularly the geopolitical and environmental costs, are borne elsewhere in the federal budget.

One could argue for a much higher gasoline tax.  Indeed I’ve done so.  But the gas tax isn’t well apportioned.  A car getting 45 miles per gallon will pay only one-third the gas tax per mile compared to a car getting 15 miles per gallon.  (As a Prius driver, I’m not really complaining about it, but I’ll acknowledge the inequity.)  It’s an appropriate tax for the geopolitical and environmental costs of petroleum, to which its collections are not directed, and a flawed tax for road construction and maintenance, to which its collections are directed.  Don’t you love federal tax policy?

For these reasons, many argue for a new form of taxation, a vehicle mileage tax (VMT).  Indeed, when we talk transportation issues at Petaluma Urban Chat, the VMT is often noted as a key omission in the economics of transportation.

At its simplest, a VMT could be imposed by having an annual odometer check with a payment assessed for mileage traveled during the year.

But if a VMT was implemented using the upper end of technology, it could be a remarkably useful tool.  If every car had a sensor that allowed the movements of the car to be continually tracked, different mileage charges could be applied to different times of day.  Driving south on 101 toward San Rafael at 8am Monday morning would have a different charge than driving the same stretch of freeway at 11pm Monday evening.

And if vehicle location is collected on a short enough time increment, speed could be calculated.  If you travel 1.3 miles on 101 in 60 seconds, you can expect a speeding ticket for going 78 miles per hour.  The automated enforcement would immediately slow traffic, resulting in gas conservation and freeing police departments for other uses. 

In an application of particular interest to me, parking could also be monitored.  Spend three hours in a two-hour zone?  The fine could be automatically added to your bill.  No meter attendant required.  Park every day at the far end of the Safeway parking lot while carpooling to a job in the East Bay?  You’d be charged for the use of the parking space, with those funds passed along to Safeway.  (Note: Carpooling is a good thing.  Hopefully, the charge would be fair to Safeway while not enough to discourage carpooling.)

But there’s a dark side to a VMT.  Many people sense a “creepiness” factor in having their car being continually tracked.  I’m perhaps not as bothered as some about it, but I can appreciate the concern.  I wouldn’t be pleased about a technocrat in Sacramento knowing if I made frequent 1am runs to a liquor store.  Or if my car spent the night outside my girlfriend’s house whenever my wife was out of town.  (Note: Both examples are extremely hypothetical.)

Atlantic Cities has written about the creepiness factor.  Emily Badger acknowledges the concern and the need to balance improved equity in road use fees versus privacy invasion.  Unfortunately, Badger doesn’t come to any helpful conclusions, winding down with the thought that perhaps churches or schools can facilitate the dialogue.  It was an interesting thought, but doesn’t seem to lead anywhere.

Against this background, it’s interesting to note that Oregon is proceeding with actual road tests of a VMT.  They’ve identified a range of VMT implementation options from strong information/low privacy to weak information/high privacy.  At this time, they’re only testing the implementation with volunteers.  But the results will be available to the state legislature which will decide on the future of a VMT.

It’ll be an interesting experiment to follow.  Because if an effective VMT leads to a higher percentage of road costs being fairly collected from drivers, it could lead to higher transit fare box collections.

As a closing note, some may ask what would happen to current property taxes and income taxes if a VMT supplants some of the needs now covered by the first two.  If our taxes were already covering the annual costs of government and if we didn’t have a deficit, property taxes and income taxes should decrease.  But as we have deficits and unmet governmental needs, the reallocation of taxes would be a legislative decision.  And I never try to predict those.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (


  1. Fascinating idea, Dave! The first concern unidentified herein that springs up for me is the one of regressive taxation. I hypothesize that a VMT, along with many demonstrably just features, would also cost lower-income taxpayers a higher proportion of their income than of mine or Matt White's. Any numbers or thoughts on this?

  2. My name is Barry Bussewitz and I made the comment about regressive taxation. I do not much like anonymous posting and did not realize the heading would be "unknown." I think I have figured out how to fix that.

    1. Barry, thanks for the comment. And thanks for identifying yourself. I agree with you about anonymous posting. I suspect that the internet would be a more respectful place if everyone followed your lead.

      I appreciate your concern about regressive taxes. But I think we eventually need to think about car usage as a luxury, not a necessity, so a VMT becomes more like a fee and less like a tax. We need to begin think of driving as a parallel to movie tickets, steak dinners, and green fees, all of which are also cost a higher percentage of income for the lower income folks.

      The problem of course is that we've constructed a world in which driving isn't a luxury, it's a necessity for most folks. So perhaps we need to institute a tax credit equalty to a percent of the VMT for lower incomes. The credit could then be reduced annually as we transition to a world in which options are available for living with little or no driving.

    2. I'm fully satisfied with proposals such as yours here to make a VMT tax reasonably fair across income groups — and to speed up a decreasing dependency on individual private motor vehicles. Due to a remarkably severe blizzard in my home state of Massachusetts Gov. Deval Patrick yesterday (Feb. 8, 2013) instituted a total ban on all non-essential motorized vehicle traffic. I can imagine the thrill of car-free avenues of white and drifting snow. I wish I were there!