This sort of flew under the radar, but a few weeks ago a federal commission floated the idea of eventually replacing the gas tax with a tax based on the number of miles driven each year. What happened next was odd: progressives, conservatives, and wonks banded together to proclaim a mileage tax to be a stupid idea.
A mileage tax is not a stupid idea. It may prove to be unworkable for technical, political, or even cultural reasons, but at root a mileage tax is both a very good idea and also possibly a necessary one as we undertake a shift away from the internal combustion engine. It’s no surprise to see politicians (like Obama) run screaming from this proposal, but why are the pundits piling on?
Before delving into the specific arguments for and against a mileage tax, it’s worth noting that the entire country of Holland is doing exactly what commentators have deemed stupid or impossible: starting in 2011, the Netherlands will phase in a vehicle-tracking scheme that applies dynamic pricing to every mile driven. Pricing will vary by vehicle type, time of day, and location, in order to curb both congestion and carbon emissions. The program is designed to be revenue-neutral, and because the government is simultaneously phasing out a steep motor vehicle tax, the plan should end up reducing the burden on low-income drivers. I mention this not to suggest that the U.S. can or should do exactly as Holland does, but just to point out that the concept isn’t quite as crazily unworkable as some seem to think.
A lot of the objections to the mileage tax are narrowly technical and can be easily dismissed. For example, many have objected to the notion of taxing a Hummer on the same basis as a Prius. OK, then adjust the tax based on the fuel efficiency of the vehicle. Problem solved.
Other objections are a bit more high-minded, but still misguided. Matthew Yglesias makes an evidence-less assertion that a mileage tax would be inefficient because it doesn’t directly tax the things we want to reduce — namely, gasoline consumption and congestion. Again, this is a technical objection that hinges on the specific implementation of the mileage tax. It also ignores other externalities associated with driving, such as wear-and-tear on roads and land use changes (read: suburbia). Finally, it’s probably just wrong. Peak-hour congestion plummeted when gas prices shot up, for the obvious reason that vehicle miles traveled and congestion are tightly interlinked.
A final objection to the mileage tax is that tracking systems are Orwellian. And certainly there’s something to this. I tend to think that the privacy concerns can be addressed through technical safeguards (and I also think we vastly overestimate how much privacy we have in other areas of our lives), but this is a debate worth having.
Of course, the mileage tax proposal didn’t arise in a vacuum. As cars become more fuel-efficient and high gas prices decrease fuel consumption, states have started to run out of money for roads and infrastructure. In response to the revenue crisis, states (including Massachusetts, Rhode Island, North Carolina, and Oregon) are already beginning to experiment with mileage-based systems. These local experiments should absolutely be welcomed — by progressives, conservatives and wonks alike. Let’s see what works and what doesn’t.