Mileage Tax Could Replace Fuel Taxes in Near Future, Lawmakers, Experts Say

This story appears in the March 2 print edition of Transport Topics.

WASHINGTON — It’s only a matter of time before fuel taxes will be replaced or supplemented with mileage taxes to pay for the nation’s roads, lawmakers and transportation policy experts said.

A switch from fuel to mileage taxes could take place in six years, a pair of U.S. lawmakers said during the annual meeting of the Mileage-Based User Fee Alliance here Feb. 24.

The nation’s infrastructure is falling apart at the same time “the Highway Trust Fund is in a death spiral,” which presents a “magic” moment in which Congress could transform the way we pay for roads and bridges, said Rep. Earl Blumenauer (D-Ore.), a leading advocate of mileage taxes.

House Democratic Caucus

The American Society of Civil Engineers estimates U.S. infrastructure needs will reach $3.6 trillion by the end of the decade.

Blumenauer has introduced a measure to raise the federal gas and diesel taxes 15 cents over three years while testing begins on mileage taxes.

“I think it could be the last time Congress ever has to act to raise the gas tax,” Blumenauer told the gathering of state officials, technology providers and mileage-tax advocates. “Then I want to get rid of the gas tax because it doesn’t work over the long haul.”

The federal tax on gasoline is 18.4 cents a gallon; for diesel, it’s 24.4 cents.

But advances in fuel-efficient cars and trucks have cut into fuel tax revenue, which is used to pay for roads.

Rep. John Delaney (D-Md.) told the gathering that if people envision a future in which we use less gasoline and see that as a win for them and the environment, “then the gas tax is a terrible source of

funding for the Highway Trust Fund because [revenue] will keep dropping and dropping.”

Delaney has introduced a bill to “repatriate” the tax money American corporations owe on overseas profits and to use the money to support the trust fund over the next six years.

At the same time, his bill would create a commission to come up with an alternative to fuel taxes. He said he prefers a mileage tax.

“We need a little bit of time to think it through and to phase it in,” Delaney said.

Several states already are exploring mileage taxes while others are developing pilot programs.

Oregon will begin testing its latest mileage tax — the state’s third pilot since 2006 — on April 1 and will “go live” July 1 with about 5,000 residents participating.

Technology is available to implement mileage taxes, and privacy concerns have been eliminated, said Jim Whitty, who manages the pilot programs in the state’s Department of Transportation.

To address privacy concerns, the state worked with the American Civil Liberties Union on safeguards, such as a provision that the mileage data collected from drivers be destroyed once they pay their tax bill, he said.

“I’m going to predict that Oregon will adopt a road-usage charge mandate for some group of taxpayers in 2017,” Whitty added.

California began exploring mileage taxes in 2007 when officials realized that fuel-tax revenue and gas consumption were declining even though vehicle miles traveled were climbing, said Gary Gutierrez, project manager for the pilot program that lawmakers mandated last fall.

“So, truly, California is in a crisis mode in terms of trying to develop some kind of sustainable funding,” he said.

On Feb. 24, California’s tax board approved a 6-cent cut in the state gas tax to 30 cents from 36 cents a gallon because of lower gas prices. The decrease takes effect July 1.

California and Oregon are part of an 11-state consortium out West exploring mileage taxes.

Officials from both states said they do not plan to have trucks in their pilot programs. In Oregon, there is no diesel tax for truckers. Instead, trucks have been taxed by weight and miles traveled.

On the East Coast, Delaware this year is among the states considering higher fuel taxes but, long term, is exploring mileage taxes, said Brett Taylor, an adviser for the Delaware Department of Transportation.

“We realize that this gas tax is really a bridge tax,” Taylor said. “We know that that’s not sustainable.”