NCPA - National Center for Policy Analysis

Gas Tax on Mileage as an Alternative to Current Federal Gas Tax

May 15, 2013

The idea of a vehicle miles traveled (VMT) tax is being discussed as an alternative to the federal gas tax, and actually tested in states like Oregon and Iowa, says Mark J. Perry, a professor of economics at the Flint campus of the University of Michigan and a scholar at the American Enterprise Institute.

One feature of the VMT tax is that it would require some way to measure travel, creating the possibility that the government will use advanced technology to track movements of every car and truck.

  • Under one scenario, automobile manufacturers would be required to install a GPS system -- a "black box" -- in every vehicle to measure miles traveled.
  • The government would then track your vehicle by satellite to follow each vehicle's total travel and calculate the tax.
  • A large-scale retrofit of existing cars would be necessary, requiring a massive and costly effort, since every car owner would be required to take their car to a station annually to have a black box installed and then read. Motorists would pick up the tab for the GPS, which would cost more than $200 each, plus installation.

The alternatives aren't much better, says Perry.

  • Another option would require wireless transponders in vehicles to report odometer readings to a central billing office, allowing the tax to be paid when refueling a vehicle at a service station.
  • But retrofitting thousands of gas stations to support a pay-at-the-pump system would be costly and time-consuming, and hybrids and electric-powered vehicles wouldn't pay their share for highway improvements.

A major drawback to a VMT tax, no matter what method is used to track mileage, is that the cost of implementing it would consume a large share of the revenue being collected.

  • The U.S. Government Accountability Office estimates that installing GPS systems in 230 million U.S. vehicles could cost up to 33 percent of the revenues generated over a 20-year period.
  • A VMT tax, moreover, would disproportionately shift the burden of federal road maintenance onto suburban and rural car owners who drive much further distances to and from work, school and for shopping than their urban counterparts.
  • In addition, the "black box" system would force us to surrender our privacy. Americans would be required to tell government agencies more and more about themselves, including their driving habits.

Shifting to a VMT system serves neither the interests of good government nor the interests of personal privacy.

Source: Mark J. Perry, "Gas Tax on Mileage Shatters Right to Privacy," McClatchy Newspapers, May 2, 2013.


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