The Debate Over Replacing Gas Taxes With Mileage Taxes

Over the weekend the New York Times published a fascinating article about an alternative to traditional gas taxes. Oregon researchers are heading up an experiment, set to start in the next six weeks, where individual cars will be equipped with GPS systems that track how many miles a car has traveled on Oregon roads and whether or not the car was driven in rush hour. Participants in the study have their cars equipped with these mileage counters and must fill up their gas tanks at one of two local service stations, at these service stations the driver will not pay a gas tax, but instead pay a tax on how many miles they drove in Oregon.

Notice any red flags?

The most obvious red flag is privacy. Do we really want a device measuring where we are going and how many miles it took us to get there? The article raises questions about whether or not the device could be used to prove that a husband/wife is cheating on his or her spouse.

This GPS-mileage tracker system would take years to implement. Presumably each state would have their own per mile rate and getting gas stations to update technology so that paying tax by the mile is an option would take awhile.

As this article on Stateline.org reports Oregon and other states are seeing gas tax revenues decline because of the use of more fuel efficient cars. This shrinking revenue base pays for about 40% of Oregon's infrastructure needs. The need for road maintenance certainly isn't going away just because the tax base is deteriorating. Switching to a mileage based tax would ensure that revenues continue to be generated so that there is adequate funding available for road projects. However, how would this change impact a driver of a gas guzzling SUV compared to someone who drives a Hybrid? The Hummer obviously uses more fuel than a Hybrid, but if both drivers travel the same 30 miles, they will pay the same tax.

One last concern is overall tax fairness. Traditionally gas taxes are a combination of user fee and consumption tax. They are user fees in the sense that the more you fill up your car with gas, the more you pay in tax. However, they are also consumption taxes (and do not take into account someone's income) which means that these taxes take a larger share out of poor people's income compared to the wealthy. If plans go forward and this experiment is deemed a success, the tax on miles driven will still be a regressive-consumption tax.

Perhaps in this instance it's more important that adequate revenues are raised and fairness then takes a bit of a backseat. But the two fundamental issues that need to be considered with this new tax are privacy and fairness for those who drive oil efficient vehicles.