The Gas Tax Versus a VMT Tax: Is ‘All of the Above’ an Option?

gas_tax.pngGas tax revenues, already insufficient to pay for transportation infrastructure, will continue to be compromised by gains in fuel efficiency. Chart: Oregon DOT.

The prospect of an eventual move away from the gas tax and towards a fee on vehicle miles traveled (VMT) has sparked consternation from some well-known bloggers this week, with Matt Yglesias asserting that "a VMT [tax] has no advantages whatsoever over higher gasoline taxes" and Andrew Samwick suggesting that declining fuel tax revenues mean that tax rates need to go even higher.

Leaving aside the political challenges facing a 10-cent gas tax increase, as suggested last year by the National Commission on Surface Transportation Infrastructure Financing (a similar panel of experts called for a gradual 40-cent hike in 2008), significant questions surround the gas tax’s viability as a long-term revenue raiser for infrastructure improvements — regardless of how high it goes.

Take the example of Oregon, the first state to levy a fuel tax in the year 1919. Now the state’s gas tax ranks 21st in the nation, but it began planning ahead for a VMT tax nine years ago after repeated attempts to raise fuel fees ran into political opposition. In its final report [PDF] on the state’s "road user fee pilot program," the Oregon DOT noted that gas tax revenue couldn’t keep pace with the rise in fuel-efficient autos (see the above chart).

The state DOT’s report, written by James Whitty of the innovative partnerships office, took a candid look at the upsides and downsides of the gas tax (emphasis mine):

From the standpoint of tax policy, the gas tax is close to perfection. Nearly all the hallmarks of good tax policy can be found in Oregon’s efficient gas tax collection system. The gas tax has the inherent flaw, however, of lacking a direct nexus to road use. As a consequence of this flaw, it will become obvious in 10-15 years, if not earlier, that the gas tax has failed its originally intended purpose as a reliable source of revenue for the state’s road system.

That absence of a "direct nexus to road use" is a concept not easily understood by many Americans, especially drivers long inundated with misleading claims that the gas tax constitutes a user fee. As Ryan Avent has explained on this page, a user fee assumes that everyone on the road pays for the time they spend and the burden they place on it.

But while 25 gallons of taxed gas will last for an estimated 725 miles in a 2010 Ford Escape hybrid SUV (at a combined 29 miles per gallon), the lighter 2010 Ford Mustang (estimated at 19 miles per gallon) would go just 425 miles while paying the same amount of gas tax. The heavier car ends up putting more stress on the road while paying less for it. Is that an equitable system of maintaining the transportation network?

As Oregon discovered with its VMT pilot program, the gas tax and a mileage fee can be charged at the same time by tallying miles traveled at the pump based on a system of local zones, similar to what some areas use for taxicab charges. As the website Portland Transport showed in a pictorial post from 2007, congestion-pricing features could be added to customer receipts in a separate column from the VMT tax and gas fees.

So perhaps the question isn’t whether to sell the public on a viable VMT tax as a replacement for the gas tax, but how to make both policy tools work effectively in tandem.

As for the civil-liberties ramifications of VMT charging, it’s hard to see American drivers who have already embraced the Garmin GPS and the Onstar navigation system — which connects you with a live "advisor" — rejecting en masse one more device in their vehicles. Especially if that device helps fund transportation more equitably.

  • I agree with Andrew Samwick as I’ve never understood the advantage of the VMT as a gas tax motivates people with their wallets to more environmentally friends vehicles. Yet further cars are generally less efficient MPG wise when driving on local roads, which generally means short distances, which means that people who are using their cars for short stints will be motivated from their wallets to walk or ride a bike instead of taking short jaunts as they would be taxed for local traffic by the gas tax at a higher effective rate of VMT than for highway travel.

    I think really we need to move to a system like Japan with extremely high tolls for all highways, have congestion pricing and have higher vehicle registration costs. The higher registration fees could easily be based on vehicle weights and types to counter balance the increase damage a type of vehicle will do to infrastructure. One could also raise the gas tax and have a VMT and either simply have both or have both quite high and have people pay the greater of the two.

    Now one question I think that always exists is that we can’t have our mass transit and our bicycle/pedestrian infrastructure wholly reliant on drivers as then we have a motivation of keeping a driving class. We need to make a real hurdle to driving and show how with the same amount of money that a person would spend on a car and taxes to support infrastructure as well as gas can much more efficiently be used for mass transit and bicycle/pedestrian infrastructure.

  • Deacon

    I agree that there needs to be tax/taxes other than the gas tax.

    My logic dictates that a tax on a vehicles weight would be the broadest most effective tax to implement. Seeing as every vehicle regardless of propulsion type has a weight. So regardless of what you drive you get taxed because your vehicle wears on the roads. Add to that a VMT tax and an incrementally increasing gas tax. These taxes are then payable over the course of a calender year whether it be monthly, 3 monthly, 6 monthly or if you choose pay the lump sum upon registration.

    I live in a suburb north of Dallas and I’ll be happy to pay more tax with registration if it means that

    1)the roads I travel aren’t in such a state of disrepair,

    2) I have an improved public transit system, as an optional alternative, as a result of the higher taxes, forcing local and state governments to step up and do something about it.

    We have to remember that there are 8 cars for every 10 americans today, people won’t take kindly to being taxed out the butt right off the bat. Increasing and adding taxes gradually allows the other modes of transit to catch up with the current system of “roads to everywhere”.

    Currently our Public transit systems across most of the US leaves a lot of people with little option other than to drive.

  • Lee

    The VMT vs. gas-tax debate really misses the point. What America and the world should be going for is road-pricing that charges users based on Time, Distance and Place (TDP). VMT only charges for distance; TDP would charge users differently depending on when they drive and which class of road they drive on.

    The end goal of TDP road-pricing should be to replace all government funding that goes to highways and local roads with user fees. This would eliminate the current implicit subsidy that encourages driving and urban sprawl.

    For more info: – Skymeter: A company that does GPS-based road-pricing

  • A lot of people miss the point of any of these taxes. There are lots of “externalities” from driving. If we wanted to tax all of them we’d have a tax for using fuel, for wearing down the roads, for polluting the air, for taking up space, for leaving a pile of junk once they can’t go any more, and for a dramatic increase in the chance of people being injured or killed. How many of these can reasonably be taxed? How many should be taxed?

  • Deacon

    @ Cap n Transit: I think the 3 main ‘externalities’ as you mentioned would be,

    1) use of fuel – use the gas tax with an incremental increase over a period of say 5 years,

    2) wear on roads – a VMT tax or a Vehicle Weight Tax – the bigger the vehicle the more damage it will cause hence the more you pay and,

    3) air pollution – emissions taxed as they do in Europe

    Make it a reasonable combination of taxes. Include in the equation tax credits for choice of vehicle, the lighter, greener you go the better the credit which you can in turn use as a deduction to lower the above combination you would have payed.

    Penalties should be incurred if a vehicle is just left in place, as happens here in Dallas, if they aren’t payed the vehicle gets towed. If after a 90 day period it has not been claimed and penalties settled have it recycled.

    In the event of the vehicle being completely useless, recycle it and get a tax credit.

    Thats my thinking. I agree with you that taxing should be reasonable and within set limits. I don’t see reason a system can’t be put in place thats both fair and responsible at the same time.

  • Cap n Transit: I think the 3 main ‘externalities’ as you mentioned would be …

    So the other three – waste of materials, taking up space and carnage – are not “main” externalities?

    Cars are a waste of materials because not every component can be completely recycled, and not all of the materials that go into their manufacture and maintenance can be recycled. Recycling is much more wasteful than not using the thing in the first place – it’s the third of the Three Rs. That’s based on the number of cars, so it should be covered in title and registration fees.

    When I talk about taking up space, I don’t just mean abandoned cars. I mean all the additional highway and parking space that’s required to transport one person. This is built based on population, but I guess if enough people forego cars, planners tend to build less of it. This could be covered by title and registration fees.

    I forgot to mention obesity from lack of exercise, which is another externality of cars. Is that proportional to VMT?

    Finally, the number of deaths and injuries that can be directly attributed to driving takes a tremendous toll on our society. That’s somewhat proportional to VMT, but recklessness and road design are also factors. Ideally they would be paid for by a VMT tax plus fines on reckless driving, but that would be – oh no! – a “revenue-generating” enforcement mechanism.

  • Jordan Hare

    I’d like to get involved with policy groups in the NYC area that are pushing for the introduction of VMT legislation in either NYC or NY state. Can anyone point me in the right direction on this?



New Report Examines the Media’s Role in the Gas Tax Debate

Chart: University of Vermont Transportation Research Center The success of state-level plans to increase gas taxes is tied to the media’s portrayal of the proposals in question, with narratives tied to "crumbling infrastructure" and "economic progress" showing more success than those emphasizing long-term transportation budget gaps, according to a new report released by the University […]