NMA Reboot: VMT Tax to Start Up in California

This weekly post features recent news stories that highlight and update themes previously covered throughout NMA E-Newsletters and Alerts.

Editor’s Note: With the stroke of a pen, Californians will be subject to yet another onerous transportation policy in the form of Senate Bill 1077. Signed into law recently by Gov. Brown, SB 1077 creates a vehicle miles traveled (VMT) tax pilot program. VMT taxes are schemes that use various tracking techniques to charge motorists based on how many miles they drive. Supporters claim a VMT tax is a more equitable and efficient alternative to the gas tax. But in reality, a VMT tax will end up costing drivers more and lead to ever-more intrusive vehicle tracking technologies. For more on the downsides of VMT taxing schemes, check out this NMA newsletter:

NMA E-Newsletter #264: Why VMT Taxing Schemes are Unnecessary and Intrusive

The Maryland General Assembly will consider a proposal this week to prohibit the state or local jurisdiction from imposing a vehicle miles traveled (VMT) tax on private vehicle owners. The measure would also prohibit the installation of GPS devices in private vehicles to track and report vehicle miles traveled. The NMA will provide testimony in support of this bill. Here’s why:

A VMT tax generates revenue for transportation funding by charging motorists a fee based on when, where and how far they travel, as opposed to the current system of charging state and federal taxes based on the amount of fuel a vehicle uses. There are several options for implementing the tax, each using different levels of technology.

On the low-tech side, drivers can simply track their annual mileage, self-report it to their state DMV and pay accordingly. Other systems track odometer readings and then record them during annual inspections or transmit them from the vehicle to a specialized gas pump that adds the tax onto a fuel purchase. Others use full-blown GPS transponders capable of tracking motorists’ detailed driving habits. After the data are transferred and compiled, the tax could be assessed at the pump, through billing or through electronic payment.

To date, 18 states have studied the feasibility of some form of VMT. The federal Government Accountability Office also released a lengthy feasibility study in 2012. The reasoning behind VMT is straightforward: States and the feds simply can’t collect enough revenue through the current fuel tax and must look for ways to either supplement it or replace it. This funding gap exists because federal fuel taxes have not been raised since 1993, and today’s more efficient vehicles don’t consume as much fuel. In addition, government inefficiency and political expediency have resulted in the diversion of billions of transportation dollars to other uses. However, this will be a problem no matter where the money comes from and should be addressed separately.

No state has embraced VMT more than Oregon. In 2007, the state began piloting a pay-per-mile program in Portland and has run several other trials since. In 2013 it enacted legislation to enable a broader rollout of a VMT tax. This program will recruit 5,000 volunteers who will pay a tax of 1.5 cents for every mile they drive in lieu of the 30 cents-per-gallon state tax they currently pay.

Supporters of Oregon’s approach point out that drivers can “pick their own poison” in terms of tracking options—from basic odometer tracking to advanced GPS technology. The odometer metering approach is less intrusive, they say, but it can’t tell when a vehicle is traveling out-of-state or off-road. GPS tracking certainly can, plus a whole lot more.

It’s the “whole lot more” that’s the problem. VMT taxing schemes facilitated by GPS track not only how far people drive, but where and when they drive as well. This leads to the imposition of congestion fees which charge extra for driving through busy areas during certain times of the day or week. Such fees limit drivers’ ability to travel where and when they want to on public roads—roads for which they’re already paying to use. They also have a proportionately greater impact on those of lower economic means and could hinder their ability to travel to work or attend school.

GPS tracking also raises serious privacy concerns. VMT supporters claim privacy protections are a top concern. They say VMT taxing schemes can be implemented without relying on GPS. But will they? Can government and corporate interests resist the temptation to vacuum up all that data? We already know the answer.

GPS is also expensive. Let’s use Maryland to illustrate. There are 4.5 million privately owned (personal and commercial) vehicles registered in Maryland. Estimates to purchase and install a GPS tracking device range from $50 to $100 per vehicle at scale. So even on the low end, that’s $225 million, and Maryland’s drivers and taxpayers would no doubt take the hit. And this doesn’t include the costs to build the infrastructure to collect and report the data, or the costs to administer the program. When those are accounted for, the all-in costs would be staggering.

Funding transportation projects through the fuel tax still makes the most sense for the following reasons:

  1. It’s equitable—users pay in direct correlation to the transportation services they use.
  2. It’s simple—the systems are already in place to collect and distribute the revenue.
  3. It’s economical—no new technology is required to implement it.

Plugging transportation funding gaps calls for raising the fuel tax and making sure that revenue generated for transportation projects actually goes toward those projects. Public officials should also consider a fee for electric and hybrid vehicles that use the public roadways but do not contribute their fair share via the fuel tax.

The existing fuel tax system can work if policymakers find the political courage to make the necessary adjustments. We don’t need any new, costly and intrusive taxing schemes.

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