Way back in 2001, Oregon recognized the problem that many state legislatures are now staring down: gas tax revenue is falling inexorably as vehicles become more fuel-efficient, threatening transportation budgets. The state launched a task force that investigated 28 alternative funding mechanisms before selecting a mileage tax as the one that best met a wide range of criteria: fairness, efficacy, ease of implementation, public acceptance, enforceability, privacy protection, etc.
In 2006, the state recruited 299 volunteers for participation in a year-long trial of a prototype system. Because any real-world mileage tax will be phased in over a long period of time, it has to harmonize with the existing gas tax. The Oregon experiment neatly solved this problem with a pay-at-the-pump system:
The Oregon Department of Transportation (ODOT) has compiled a 100-page report on the experiment [PDF] that covers a lot of ground, but basically describes the trial as a roaring success. Note several features of this system:
- Overhead is low. Because the mileage tax piggybacks on the existing gas tax collection system, it’s easy and cheap for the state to administer.
- Payment is simple. From the driver’s perspective, the mileage tax differs little from the gas tax, other than the fact that their gas station receipts contain interesting information on miles driven.
- Privacy is protected. The state only gets odometer information, not information about vehicle location.
- Evasion is difficult. Even if you tamper with the GPS receiver, you’re still going to pay the gas tax.
- Phased implementation is possible. Oregon doesn’t foresee a complete changeover to mileage taxes happening until 2040. This is a bit too slow for my taste (I really hope gas stations don’t exist in 2040), but the point is that gas taxes and mileage taxes can happily coexist as the vehicle fleet turns over.
Technically, the system worked. Just as importantly, public acceptance was high; 91 percent of test participants preferred the system to paying gas taxes. Obviously this was a self-selected group of people, but the broader public response was equally telling. Before the experiment began, media portrayals of the system were almost uniformly negative — and inaccurate. By the middle of 2006, media coverage ranged from neutral to positive, and were far more accurate. Citizen comment reflected this broader trend. ODOT concludes, “Effective communication can lead to public acceptance.”
Perhaps most exciting from an environmental perspective are the ancillary benefits that such a system can provide. Halfway through the experiment, ODOT divided participants into two groups (plus a control group). One group paid a flat per-mile fee. The other paid a congestion fee of 10 cents per mile during peak driving times in the Portland metropolitan area. The congestion fee was separately itemized on participants’ fuel receipts.
It turns out that all participants reduced their driving relative to the control group — a somewhat surprising finding, because the mileage tax was designed to be revenue neutral. Anecdotally, many participants reported changing their driving habits in response to the GPS mileage displays in their cars. “One person commented that she began walking to neighborhood places when she realized by looking at the display how short the distance from her home actually was. Other people said they began organizing short trips from home to consolidate to one trip.”
The results among the congestion-fee group were even more dramatic. These participants dropped their peak hour driving by 22 percent compared to the control. And this group also reduced their total driving by more than the flat-fee group, indicating that they didn’t just shift their driving to other times.
These results are preliminary, but suggestive. And they only scratch the surface of the possibilities opened up by a mileage-based pricing system. As the report notes, the system could provide a powerful tool to “metropolitan planning organizations (MPOs) looking for fair and stable means to fund regional plans, manage growth, contain air pollution and support better land use decisions.”
Oregon currently faces a $10 billion dollar revenue shortfall for transportation financing. Earlier this year, the governor of Oregon called for state-wide implementation of a mileage tax.
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