Deron Lovaas is the National Transportation Policy Director at the Natural Resources Defense Council. Robert Puentes is a senior fellow at the Brookings Institute, where he focuses on issues related to metropolitan growth and development.
Transportation Secretary Ray LaHood’s suggestion last week that the nation consider adopting fees based on mileage driven (sometimes referred to as vehicle miles traveled, or VMT, fees) was brushed aside too quickly. While substantive issues remain, there is no reason to throw the baby out with the bath water.
This worthy idea is part of the long term future of transportation finance in this country. It would use satellite tracking devices to record how far and when motorists drive and would assess a fee based on those travel habits. Benefits include better allocation of revenues (based on the roads used), better allocation of costs (vehicles damaging to infrastructure such as heavy trucks could be assessed at a greater fee), and better allocation of resources (higher fees could be charged based on time of day and congestion levels).
As our brethren in the U.K have learned, when planning for transportation infrastructure use and expansion, a focus on demand is important. The landmark 2006 Eddington Transport Study noted: “Policies to influence demand must be considered alongside, and in many cases before, turning to increase supply.” Innovative pricing policy is central to the recommendations in the study, which found that introducing markets-based pricing “can have a very powerful and positive economic effect in any sector. The transport sector is no exception, and in particular the potential for benefits from a well-designed, large-scale road pricing scheme is unrivaled by any other intervention.”
One big advantage of focusing on demand management, which should interest local, state and federal governments wrestling with fiscal challenges, is that it can forestall the need for costly road capacity expansions. This is why the U.K. has adopted a policy for the past fifteen years of first reducing traffic, then managing it, and only then resorting to capacity expansion. This eases the burden on already strained transportation budgets.
An increasing number of jurisdictions around the world are turning to road pricing, which also has the distinct advantages of a more direct linkage to the use of roads than the gas tax. Former Transportation Secretary Mary Peters described other advantages in congressional testimony in 2008, which includes congestion relief, revenue generation, and carbon reduction.
Privacy concerns are ever-present in any VMT fee discussion. The late Professor David Forkenbrock of the University of Iowa is perhaps the foremost analyst of various means to address this issue. He recommends limiting the information collection and encrypting data. The point is that a program can be designed so that it is not intrusive enough to trigger anxiety about privacy.
Another concern is distributive equity – low-income people with few options could end up bearing a disproportionately large burden. However, this can be remedied by using the revenue to provide a range of transportation alternatives, as in the case of London, which added a fleet of new double-decker buses to the streets and new trains to the Tube.
What about the fact that fuel-efficient cars would be “taxed” at the same rate as Hummers? Again, program design can trump this concern. Just apply a sliding scale of per-mile charges based on the fuel-efficiency of the vehicle, something which would be doubly sensible since vehicles which waste energy are also often those that impose the most wear-and-tear on roads given their larger size and weight.
Similarly, some environmentalists naturally express concern that a long term replacement of the federal tax with a VMT charge removes the incentive for more fuel-efficient vehicles. While that is certainly true, it is important to note that the federal gas tax only makes up 9 percent of the cost of a gallon of gasoline. The vast majority comes from the cost and from the refinement of the crude oil. And there are few who believe those costs are going to stay at their current low levels.
It is instructive to look at a recent experience with this policy. Oregon, the first state to adopt a gasoline tax, piloted the VMT fee in a March 2006 to March 2007 program, as described in a paper with the appealing title “So Simple It Could Work!” At two specific service stations, 260 volunteers were charged for the miles they drove, with privacy protected by: Not storing or transmitting point location data; making all on-vehicle device communication short-range; and ensuring that “the only centrally stored data needed to assess mileage fees was prior zone mileage totals for each vehicle.” The experiment was simple to administer, requiring payment at the pump. This was easier on motorists, business owners, and government than a new billing system. Volunteers in Oregon were certainly pleased with the new system – 91 percent said they would continue with the program if it were adopted at all service stations.
Given the merits, this policy is worth considering on the national stage. While there are valid concerns, we believe these can all be trumped with smart and effective program design. And when developing this program, other possible revenue sources and demand-reducing charges should not be brushed aside. In fact, the federal government should provide stronger incentives for the adoption of market mechanisms such as congestion pricing to maximize the efficiency of metropolitan road networks.
Finally, while a variety of revenue-generating ideas are worth consideration, this must be coupled with a broad, comprehensive and inclusive discussion about how that revenue is invested —a discussion that includes accountability, overall intent, and connection to broader goals of energy-efficiency, economic growth and personal mobility.
February 24th, 2009 at 12:28 pm
What about instead of installing GPS devices in cars and retrofitting gas stations with special pumps, we simply use odometer readings to determine miles traveled? States could require the odometer to be inspected once a year in order to receive new tags for license plates. The disadvantage of this system would be that taxes would only be paid once a year, not at the time of each fill-up. The other disadvantage would be that it would not be automatic. However, it would solve the privacy concerns of mileage tax opponents.
February 24th, 2009 at 1:04 pm
Beg to differ. National VMT is a silly idea.
Why build a sophisticated tracking system to monitor where and when drivers are driving on highways, and then go to great lengths to protect the privacy of the data? And then go to greater lengths to account for and encourange fuel efficiency?
Taxing a gallon of gas does all this without sattelites or cameras. Drive a mile, consume a mile’s worth of gas. If you use fewer gallons per mile, then you pay less tax. Once you drive away from the pump nobody knows where you go.
Congestion pricing on urban streets is different than a national VMT and is a smart local (not federal) decision. I wish Mayor Mike had a used bit more political savvy than when he tried to bulldoze the plan through NY.
February 24th, 2009 at 3:34 pm
Odometer reporting may be workable, although it wouldn’t be as reliable as other means of monitoring. And we don’t think this policy and gas taxes are mutually exclusive.
I don’t understand why the argument that this is good local policy isn’t an additional reason for considering it statewide and nationally.
I also assume none of those concerned about privacy carry a cell phone or Blackberry, which compromises privacy vis-a-vis location much, much more than a mileage-reading device in your car.
February 24th, 2009 at 3:53 pm
[...] receive serious consideration, because as Rob Puentes of the Brookings Institution and I write in an infrastructurist.com piece, while there are valid concerns about program design, the baby shouldn’t be thrown out [...]
February 24th, 2009 at 4:07 pm
Why does congestion pricing need to be local? True, it is most effective in dense urban cores, but there are mechanisms through which more national schemes could be implemented. The government could implement a variable congestion charge on all interstate highways. Cities with downtown congestion pricing could receive extra transportation dollars from the federal government. Indeed, highway funding dollars have been used as an effective federal stick on everything from speed limits to drug policy - it could be tied in here, too. Various forms of congestion pricing need to be implemented more widely, and the government should absolutely encourage this.
That said, I don’t see the big advantage of the VMT. It seems to me that the most sensible transportation funding solution would combine congestion pricing schemes with a considerably higher gas tax. The basic policy outlined in this post - reduce traffic, manage it, and only then increase capacity - is very intelligent. I just don’t see how a VMT helps to achieve this goal any more than gas taxes and congestion pricing. The VMT isn’t exactly a horrible idea, and, yes, the privacy concerns could likely be worked through. It just seems superfluous.
February 24th, 2009 at 5:50 pm
Another thoughtful response, and I agree that if existing policy tools like the gas tax and road pricing (tolling, congestion pricing) are adequate for achieving important goals (energy savings, fiscal balance, transportation system efficiency, personal mobility, etc.), then we may not have to make use of this tool.
However, in the long run if we are serious about ramping down our gasoline use — and I hope we are — by boosting vehicle efficiency and shifting to alternative energy sources for transportation, this policy tool will be very helpful for achieving those goals.
February 25th, 2009 at 2:19 pm
VMT is not the answer. It requires expensive infrastructure (satellites and billing systems), imposes another bureaucracy to collect VMT fees, and will certainly provoke the ire and opposition of privacy rights activists. Plus, it does little to promote fuel efficiency or greenhouse gas emission reductions.
Increasing the gasoline tax capitalizes on a revenue generating system that is already fully in place. It is anonymous and doesn’t infringe on personal privacy, and isn’t prone to individual tampering. It rewards those who drive fuel efficient vehicles and practice sensible vehicle operating practices, such as minimizing idling. Reductions in fuel consumption translate directly into cleaner air and reduced carbon emissions.
February 25th, 2009 at 4:12 pm
I was going to comment sarcastically about how wonderful it would be if there were some way to tax the actual *energy* that vehicles use, but I see that Marty has covered the point adequately. In fact, with two short paragraphs, he’s managed to debunk your entire 900 word article.
February 25th, 2009 at 6:27 pm
VMT may not be the answer, but not for the reasons given. Marty, the satellites are already there as are the billing systems(every county seat has a vehicle licensing office or two), therefore NO new bureaucracy needed It is not designed to promote fuel efficiency nor reduce gas emissions, it IS designed to collect taxes for the actual USE of the roadway systems in America. The current system, when factoring in the reduction of driving, the increase in fuel efficiency and the increase in alternative fuels, starts to be unsustainable. A case in point was this past year, where the Highway Trust Fund came up $8 billion short. In short order, our highway will become undrivable for anyone.
On the privacy note, anybody who has a vehicle equipped with OnStar, already has the GPS, recording monitor and the transmission mode installed. All OnStar autos have the ability to eavesdrop on any conversation(with the added convenience of knowing exactly where you are) at any time. Oddly enough, all cell phones manufactured in the past five years can do the same thing, whether you have it on or not.
Something I have not seen anywhere is the idea to apply time of day to the collection of data, or even the weight of the vehicles. Believe it or not the computer which controls the engine already knows this.
May 16th, 2009 at 8:32 pm
[...] [...]
September 2nd, 2009 at 10:07 am
[...] floating of the idea, there exists nonetheless a substantial contingent of wonks who continue to agitate for the idea. The idea of a VMT tax feels more like a high modernist scheme than a well-considered [...]