Should US drivers pay per-mile or per-gallon?

Massoud Moradi | 20 Jul 2015 | Comments

For the 33rd time since 2008, congress is expected to pass yet another stop gap measure—a temporary fix—to the nation’s transportation funding. The July 31st deadline (when current funding expires) is just days away. And the timing could not have been worse, taking place during the peak of roadway constructions season.

Federal fuel taxes, a major source of transportation funding and main contributor to the Highway Trust Fund, have not increased since 1993. As a matter of fact, when factoring in inflation, its value has actually eroded by 40 percent.

Automobiles are now twice as fuel-efficient as they were in 1975, and will be yet twice as efficient by 2025 due to the Environmental Protection Agency’s CAFÉ requirement. That means they will consume less gasoline and pay less fuel taxes. Electric and hybrid vehicles, which are fast gaining popularity, are good for the environment and air quality, but do not contribute their fair share of fuel taxes and infrastructure upkeep.

And unfortunately it gets worse. The cost of constructing highway and transportation infrastructure has escalated well above the national Consumer Price Index (CPI) and inflation for the past decade.

It’s exceedingly clear that the status quo is unsustainable and “business as usual” is not an option. So then, what are our options?

Option 1: Congress approves an increase to the federal gas tax now, and ties future annual increases to the CPI or other indices. Many believe that the current political environment in Washington makes this option dead on arrival. The notion of new taxes is a nonstarter for many politicians, particularly those who are up for 2016 and 2018 (mid-term) re-elections.

Option 2: Use other taxes/revenues (e.g., corporate foreign investment income) to supplement the Highway Trust Fund. This solution, even if passed by the legislative branch, is not only unsustainable, but unpredictable. In my view, it is also philosophically flawed. Fuel taxes, after all, are paid by road users for the upkeep and expansion of the roads they drive on. By supplementing road funds with unrelated taxes, this solution becomes an unfair subsidy.

Option 3: Use a per-mile road user fee instead of a per-gallon fuel tax, similar to Germany’s Toll Collect or Oregon’s pilot project (OReGO). A Mileage-Based User Fee (MBUF), Vehicle Mile Travelled (VMT) or Road User Charge (RUC) seems to be a very viable solution. Here are a few reasons the whole country (not just Oregon) should give this option some serious consideration:

  1. It’s fair: You pay for what you drive, regardless of your fuel source or efficiency. Your impact to the traffic flow (capacity of the roadway) remains the same, so the fee you pay reflects this.
  2. It can be congestion-priced: Depending on the level of congestion and roadway capacity, the per-mile user fee can be dynamically adjusted. This pricing concept is used by utility companies, airlines, hotels cruise lines, and others. It also has the potential to change driver behavior and choices through alternate route selections, planned time of travel, or use of public transportation.
  3. The technology is available and it’s getting cheaper: Many pilot projects in the US and current implementations in Europe have proven that satellite and other detection technologies work and can be scaled. In my home state of Florida, the majority of registered vehicles are already equipped with transponders due to the success of all-electronic tolling and the numbers are increasing every day. The legacy transponders of early 1990’s were not only bulky and battery driven, but also expensive ($25-$50 each). Those are now being replaced by battery-free sticker tags, with a cost of a few pennies.
  4. Fees are adjustable: This approach could allow discounts for low- or no-emissions vehicles to discourage pollution, or charge large/heavy trucks more to cover their increased impact on the pavement and traffic flow.
  5. The public doesn’t mind new gadgets: With the wide-use of social media and internet-based electronic gadgets that track our movement, sleeping habits, caloric intakes and shopping habits, we’ve largely accepted technology in exchange for greater ease, convenience, and efficiency in our daily lives. We’ve become accustomed to monitoring devices installed in places like malls, arenas, intersections, and other public facilities that already collect and compile far more data about us than a sticker tag on our car windshields.

Similar to the early 1900’s when the state of Oregon pioneered fuel tax collection and all the other states and Federal government quickly joined suit—I believe it’s time again for us to follow Oregon’s lead and seriously explore the per-mile option nationwide. In bringing together transportation and technology experts to push forward effective and innovative approaches, the open road will continue to be a treasured American hallmark.