Recently I’ve been flogging the concept of a mileage tax, a system of per-mile road usage fees that over time can replace our dysfunctional gasoline tax as a way of funding transportation infrastructure. Although people have raised a lot of interesting objections, I’d like for now to skip ahead and simply describe Oregon’s successful experiment with a mileage tax. A single real-world example can be a lot more illuminating than an entire internet’s worth of abstract debate.
Way back in 2001, Oregon recognized the problem that many state legislatures are now staring down: gas tax revenue is falling inexorably as vehicles become more fuel-efficient, threatening transportation budgets. The state launched a task force that investigated 28 alternative funding mechanisms before selecting a mileage tax as the one that best met a wide range of criteria: fairness, efficacy, ease of implementation, public acceptance, enforceability, privacy protection, etc.
In 2006, the state recruited 299 volunteers for participation in a year-long trial of a prototype system. Because any real-world mileage tax will be phased in over a long period of time, it has to harmonize with the existing gas tax. The Oregon experiment neatly solved this problem with a pay-at-the-pump system:
- A small GPS receiver in participants’ cars tracked miles driven.
- When participants went to the gas station to fill up, a wireless scanner at the pump detected the GPS receiver and recorded the car’s current mileage, which was then sent to a central database to determine miles driven since the last payment. No specific location data was transmitted.
- The payment system at the gas station applied either the standard gas tax (for cars that didn’t have a GPS system) or the mileage tax (for participating cars). The experiment was designed to be revenue neutral, so fees were about the same in either case.
The Oregon Department of Transportation (ODOT) has compiled a 100-page report on the experiment [PDF] that covers a lot of ground, but basically describes the trial as a roaring success. Note several features of this system:
- Overhead is low. Because the mileage tax piggybacks on the existing gas tax collection system, it’s easy and cheap for the state to administer.
- Payment is simple. From the driver’s perspective, the mileage tax differs little from the gas tax, other than the fact that their gas station receipts contain interesting information on miles driven.
- Privacy is protected. The state only gets odometer information, not information about vehicle location.
- Evasion is difficult. Even if you tamper with the GPS receiver, you’re still going to pay the gas tax.
- Phased implementation is possible. Oregon doesn’t foresee a complete changeover to mileage taxes happening until 2040. This is a bit too slow for my taste (I really hope gas stations don’t exist in 2040), but the point is that gas taxes and mileage taxes can happily coexist as the vehicle fleet turns over.
Technically, the system worked. Just as importantly, public acceptance was high; 91 percent of test participants preferred the system to paying gas taxes. Obviously this was a self-selected group of people, but the broader public response was equally telling. Before the experiment began, media portrayals of the system were almost uniformly negative—and inaccurate. By the middle of 2006, media coverage ranged from neutral to positive, and were far more accurate. Citizen comment reflected this broader trend. ODOT concludes, “Effective communication can lead to public acceptance.”
Perhaps most exciting from an environmental perspective are the ancillary benefits that such a system can provide. Halfway through the experiment, ODOT divided participants into two groups (plus a control group). One group paid a flat per-mile fee. The other paid a congestion fee of 10 cents per mile during peak driving times in the Portland metropolitan area. The congestion fee was separately itemized on participants’ fuel receipts.
It turns out that all participants reduced their driving relative to the control group— a somewhat surprising finding, because the mileage tax was designed to be revenue neutral. Anecdotally, many participants reported changing their driving habits in response to the GPS mileage displays in their cars. “One person commented that she began walking to neighborhood places when she realized by looking at the display how short the distance from her home actually was. Other people said they began organizing short trips from home to consolidate to one trip.”
The results among the congestion-fee group were even more dramatic. These participants dropped their peak hour driving by 22 percent compared to the control. And this group also reduced their total driving by more than the flat-fee group, indicating that they didn’t just shift their driving to other times.
These results are preliminary, but suggestive. And they only scratch the surface of the possibilities opened up by a mileage-based pricing system. As the report notes, the system could provide a powerful tool to “metropolitan planning organizations (MPOs) looking for fair and stable means to fund regional plans, manage growth, contain air pollution and support better land use decisions.”
Oregon currently faces a $10 billion dollar revenue shortfall for transportation financing. Earlier this year, the governor of Oregon called for state-wide implementation of a mileage tax.
Cash for Clunkers brought us ... more clunkers!
Comments
View as Flat
jpcrane Posted 12:00 pm
02 Apr 2009
Permalink
sindark Posted 11:36 am
03 Apr 2009
include an optional component for cyclists. Those willing to cycle
around with a transponder would be credited at a modest rate for
distance travelled. This would be in recognition of the non-market advantages of cycling, such as the value of physical fitness as a component in preventative medicine. In 1998, Health Canada estimated the total cost of cardiovascular diseases on the health sector of the
Canadian economy to be $18,472.9 million (11.6% of the total cost of
all illnesses). Cardiovascular disease is also responsible for 36% of
deaths. As such, a subsidy of a few cents a kilometre makes economic
sense, as well as potentially generating some good publicity for a
system that is likely to be highly unpopular with commuters. There are also network benefits to be had from increasing the number
of cyclists. The emergence of suburbs was made possible by automobiles,
at the same time as such urban trends made them increasingly necessary.
A more positive version of such feedback effects can be brought about
for cycling: as higher numbers justify a more cycle friendly
infrastructure which, in turn, encourages more people to cycle. In
particular, the creation of designated bike lanes and routes, the
provision of cycle parking facilities, and integration of bike carrying
capabilities into public transport seem sensible.
Permalink
mgpr Posted 12:48 pm
03 Apr 2009
Permalink