Mileage tax: Good or bad?

Should the freeway be free?

A recent story about a pilot study for a mileage tax in Iowa prompted a couple of negative reactions on our Facebook page.

Why a mileage tax? Because as cars get more efficient, revenue from fuel taxes isn’t keeping pace with the costs of road infrastructure. Drivers of hybrid and electric vehicles are essentially exempted from paying for their share of the roadway.

Many would say this is a feature, not a bug. There’s a persistent argument that a tax on miles driven, rather than on fuel consumed, would eliminate an incentive for people to buy more fuel-efficient cars.

I’m not so sure about that.

For starters, consider that buying a fuel-efficient car isn’t always a purely rational economic decision. Some researchers found that hybrid owners, for instance, are primarily motivated by the identity and image the cars project — just like the Jeep owner who never leaves the pavement but still wants people to think he’s adventurous.

And even if you eliminated the gasoline tax and replaced it with a mileage tax, there’s still a financial incentive to buy the more fuel-efficient car, because either way, you’re still spending less money on gas. State and federal gasoline taxes average about 50 cents per gallon — if those taxes went away today, gas would still be more than $3 a gallon, and local TV newscasters would still be hyperventilating about it.

The purely pragmatic will stick with the economy car because it’s cheaper to purchase, maintain and insure. And the person plunking down $40,000 for a Chevy Volt can probably afford to disregard a slight reduction in the price of gas.

To be sure, any proposed mileage tax would be politically unpopular, because it would involve installing a GPS or other tracking device in cars, which raises obvious privacy concerns. The goal of the Iowa study was to see if participants would eventually get over fears that “Big Brother” was watching their every move.

But should such technology become widespread, it opens up all sorts of possibilities for encouraging fuel conservation.

The whole point of the mileage tax is to ensure that all road users are paying for their share of road repairs and maintenance. So wouldn’t it only be fair to assess drivers of heavy, less efficient vehicles at a higher rate? After all, they do more damage to the roadway. Many states already charge higher registration fees based on weight.

You could also theoretically charge different rates for different roads at different times of day. Imagine the ability to impose real-time congestion pricing on every freeway in America — a concept that, in London, has resulted in reduced traffic and improved transit service. The data would also make it possible for insurance companies to reward drivers who avoid peak driving times with lower rates.

One could argue that the gasoline tax already does a lot of these things, and that’s pretty much my point. Raising the gas tax has been a political non-starter for years, so if a mileage tax becomes more palatable to the public (and I’m not suggesting it necessarily will be), and we end up with an equitable way to make people pay for the roads while still creating incentives to drive less, what’s not to love?

Photo by drain via Creative Commons

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