Congress, Some States Consider Creating Tax on Miles Driven

By (Display Name not set) March 29, 2011

Wide-open-road.jpgBy Danny King, Contributor

U.S. Congress and at least three states are proposing the idea of taxing motorists on miles travelled in addition to taxing them on the fuel they use to better make up a shortfall in federal highway funding in a move that would capture revenue from alternative-fueled and electric-drive vehicles while removing some of the incentive for buying fuel-efficient cars.

The Congressional Budget Office last week released a 38-page report examining the idea of using a so-called vehicle miles travelled (VMT) tax to better align taxes with highway costs incurred by U.S. drivers. Oregon, Texas and Washington state are also considering VMTs, with Oregon proposing a VMT on drivers of battery-electric and plug-in hybrid-electric vehicles that would start in 2014.

VMTs are being considered by both the federal and state governments as a way their proponents say will help close the gap between highway costs and funds.

As overall fuel economy has improved -- the 2010 model-year light-duty vehicle fleetwide fuel economy of 22.5 miles per gallon marks a 17 percent jump from six years earlier, according to the U.S. Environmental Protection Agency -- gas taxes cover a decreasing share of funding need to maintain federally-funded highways.

Drivers typically pay about 2 cents a mile in state and federal fuel taxes, compared to costs of almost 15 cents a mile in the form of congestion, accidents and air pollution, according to the Congressional Budget Office report.

"Most of the costs of using a highway are tied more closely to the number of miles traveled than to the amount of fuel consumed," the report said. "Therefore, charging highway users for the full costs of their use, or in proportion to the full costs, could not be accomplished solely through fuel taxes. Accomplishing those goals would require a combination of fuel taxes and per-mile charges."

The current gas tax, which averages about 20 cents a gallon nationwide, raised about $24 billion for the highway trust fund last year, while the federal government accounts for about a quarter of the approximately $150 billion spent to build, repair and maintain U.S. highways. Almost half of the vehicle miles travelled in the U.S. are on interstates despite the fact that interstates make up just 7 percent of U.S. highway-lane miles.

How the VMTs would be enacted is still a point of discussion, with systems based on GPS readings and a self-reporting process being proposed. Still, VMTs are likely to further spur debates over how the federal government should or shouldn't incentivize drivers for buying more fuel-efficient cars or electric-drive vehicles.

Last December, Presiden Obama signed an $858 billion tax package that in part extended tax credits for biofuels but also allowed for a number of tax credits for hybrid-electric vehicles, compressed-natural-gas vehicles and diesel vehicles to expire.

That means that while buyers of battery-electric and plug-in hybrid cars and trucks in 2011 get a $7,500 credit on battery-electric and plug-in-hybrid vehicles such as the Nissan Leaf and Chevrolet Volt, as well as write down some of the cost of purchasing and installing charging stations for the vehicles, incentives on about 20 hybrid, CNG and diesel vehicles also expired.

That VMTs are being considered for Oregon is also topical given the state's aggressive role in promoting electric-drive vehicle adoption. Last September, San Francisco-based electric transportation product developer ECOtality said it would install more than 1,100 of its Blink electric-vehicle charging stations in and around Portland, Salem, Eugene and Corvalis, making Oregon a major cog in the company's $230-million plan with the federal government to install more than 15,000 states across six states over the next three years.

Oregon also passed a $1,500 tax credit for electric-vehicle buyers in 2009, while Governor Ted Kulongoski said the state would install a string of fast chargers beside U.S. Interstate 5 along the approximately 200 miles between Eugene and the California border.

Still, VMTs are among a growing list of initiatives aimed at putting a greater premium on road usage and not just fuel consumption. A recent study by the nonprofit Energy Security Leadership Council concluded that the U.S. needed to follow the lead of cities such as Singapore, London and Stockholm by enacting so-called "cordon pricing" policies, also called congestion pricing, that charge drivers to enter the busiest parts of metropolitan areas while being more aggressive in putting toll roads into use.

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