Improved fuel efficiency is one of the easiest and practical solutions society can implement to combat climate change, but its unintended consequences are large: potholes and shaky bridges all across the U.S. map. That’s because more efficient cars means barren fuel-tax coffers, which traditionally have funded bridge and road infrastructure.
The federal gas tax of 18.4 cents a gallon hasn’t budged in two decades, and that hasn’t helped those coffers, either; indexed for inflation, it would be at about 30 cents per gallon today. The effect is that such infrastructure has nearly 40 percent less funding than in 1993.
Given the lack of funding, it’s little wonder, then, that the American Society of Civil Engineers gives America’s roads a D and bridges a C in its 2013 report card.
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Oregon—where 1 in 6 bridges is functionally obsolete and 65 percent of roads are in poor to mediocre condition—is doing something about it. And other states are watching closely.
Instead of taxing gas, Oregon is conducting an experiment with taxing road usage, or vehicle-miles-traveled (VMT).
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In 2015, 5,000 volunteers will start paying 1.5 cents per mile instead of the state’s 31-cents-a-gallon tax—that is, they’ll be reimbursed the tax at the pump. (The total gas tax in Oregon, including the federal portion, is 49.4 cents.)
“On its face it makes sense,” says David Zahn of FuelQuest, a software services company for fuel management. “If you drive more miles, you should pay a little more.”
Trey Baker of the Texas A&M Transportation Institute was on his way to Portland on Tuesday for the Road Usage Charge Summit about VMT. He said the Oregon VMT is a new way to address the infrastructure funding problems without being dependent on the purchase of gasoline.
“It started 12 years ago with the road-usage-fee task force,” said James Whitty, one of the leaders of the state’s program. “The aim was to figure out what Oregon’s future road funding should look like, as we saw cars becoming more fuel-efficient, leaving less money for roads. And that has come to pass.”
Zahn and Baker expressed admiration for Oregon’s willingness to try something different, but they both saw a fundamental flaw: VMT is one more driver tax that is not indexed to inflation. Such indexing is, of course, a political bugaboo.
“When you replace one non-indexed tax with another, does that solve anything?” asked Zahn.
“VMT doesn’t do anything to fix that political problem,” Baker said. “And you’re probably going to end up in the same place with the same problem if you don’t raise the tax over time.”
Whitty sees it as a separate issue. “There are two deflating factors in the gas tax: inflation and fuel-efficiency. The per-mile charge addresses one of them,” he said.
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Critics of Oregon’s plan have additional complaints: They say a VMT does not incentivize people to drive greener cars the way a gas tax does, and it doesn’t discourage the use of big vehicles that tread more heavily on the highways.
“Dealing with climate change is not a top priority of Oregon’s transportation planners,” said Steve Woolpert, professor of politics at Saint Mary’s College of California.
Some view the VMT as a means of addressing an unfairness in the system as people opt for more fuel-efficient vehicles—for example, that Prius drivers end up paying less for road infrastructure than their gas-guzzling counterparts. Woolpert thinks that’s a wrongheaded argument. “(VMT) will weaken incentives for buying fuel-efficient vehicles. … It is unfortunate that Oregon is pursuing a VMT rather than a comprehensive response to climate change.”
But Whitty said that those who think Prius drivers should pay less for road infrastructure are missing the point. “Every motor vehicle demands that the road be in shape when it leaves the driveway,” he said. He added that while the 5,000-volunteer deployment of the road-usage charge is open to all vehicles regardless of fuel-efficiency, a broader road-usage tax deployment “would likely only apply to fuel-efficient vehicles,” while gas guzzlers would be stuck with the gas tax.
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Privacy advocates have also voiced concerns. The default measurement device will use GPS, and in America’s post-Snowden era, many are skittish about handing the government even more tracking data, even if the state promises it will be destroyed after 30 days. As a workaround, the plan allows for simply paying a flat tax or measuring miles traveled by odometer readings.
Of course, that’s hardly foolproof when some 452,000 used cars are sold in the U.S. with falsified odometer readings each year, according to a National Highway Traffic Safety Administration study.
“There’s a possibility of fraud with any hardware solution,” said Zahn.
But Whitty pointed out that the reading is not of the manufacturer-installed odometer, but an auxiliary device that plugs into a car’s diagnostic port and delivers data gathered from wireless—presumably harder to tamper with.
1919 all over again?
Zahn said the self-selective nature of the 5,000-person deployment is problematic as a template for any larger scheme in the future: It’s most likely to attract people who have done the math and who see it as being economically advantageous for their particular vehicle and driving habits. It’s also unlikely to attract a representative number of people bent on defrauding the system.
Baker says he thinks odds are very good other states will test systems like VMT—the need to address infrastructure funding shortfalls is just too urgent.
Zahn sees the system’s costs and politics as roadblocks. “I think it’s a long way off before you’d see something that is recognized nationally,” he said. Between the cost of tracking devices, fraud detection and enforcement, Zahn questioned, “Can they really reach their goal of broadening the tax base?”
But skeptics of Oregon’s scheme may want to note that this isn’t the first time the Beaver State has blazed a taxation trail: In 1919 it was the first state to tax gasoline by the gallon.
Within a decade, all other states had followed suit.
—By Matt Twomey, Special to CNBC.com
Follow him on Twitter @Matt_Twomey