Will Vehicle-Mile Fees Be a User Fee or a Tax?

Earl Blumenauer, Oregon’s bow-tie wearing, bicycle-riding member of Congress, has endorsed the idea of replacing gas taxes with vehicle-mile fees. Last week, he introduced a bill directing the Department of Transportation to start vehicle-mile fee pilot programs in every state and authorizing $150 million to fund the pilots. Since privacy is a major concern for many people, Blumenauer wisely makes protection of personal privacy a top priority of the legislation.

Blumenauer’s support for vehicle-mile fees is refreshing considering that, during the last Congress, the House passed a bill forbidding the Department of Transportation from even studying the possibility of such fees. (The otherwise-fiscally conservative member of Congress who introduced that bill ended up being a one-term congressman.) But Blumenauer’s stance also has some questioning his motives as he is one of Congress’ leading advocates of funding rail transit and other non-highway programs out of gas taxes.

It’s true that Blumenauer supports building streetcar lines more than new roads. In introducing the bill, the congressman focused on the fact that, over the past four years, Congress has had to transfer $48 billion in general funds to the Highway Trust Fund, and is currently spending $15 billion a year more on surface transportation than is coming in from gas taxes and other highway user fees. The Oregon representative obviously hopes vehicle-mile fees will help close the gap, allowing him and his colleagues to continue funneling billions of dollars into rail transit and other forms of travel that are actually pretty obsolete.

Of course, Congress could also close the gap by just spending no more money than it takes in. As it happens, the annual deficits are roughly equal to the amount Congress diverts to non-highway projects, so it is not that highways aren’t paying for themselves; they just aren’t paying for the pork Congress wants on top of roads. It is ironic if not hypocritical for highway opponents to insist on diverting billions of dollars from gas taxes to transit and other non-highway programs, and then proclaim that such deficit spending proves that highways are subsidized.

Still, I welcome Blumenauer’s support for vehicle-mile fees, which have several major advantages over gas taxes. First, they will allow people to pay for the roads they actually use and not just for the gallons of gasoline they burn. Second, once the technology is implemented, cities and counties–which currently spend about $30 billion in general funds subsidizing roads–can collect vehicle-mile fees and end all subsidies to roads. Third, as I explain in a recent Cato Policy Analysis, varying vehicle-mile fees with traffic levels can end congestion by effectively doubling highway capacities during rush hour. Fourth, by forcing state, county, city, and other road owners to compete for people’s travel dollars, they would offer road users better services at lower cost.

Moreover, rather than a way to fund more pork barrel, vehicle-mile fees would offer a natural path towards devolving transportation funding to state and local areas. The only real justification for a federal gas tax is that the federal government has an inexpensive way to collect this form of user fees: it collects the tax straight from refineries and importers long before the fuel reaches your local gas station. With vehicle-mile fees, the revenues can go straight to the road owners–meaning states, counties, cities, and private owners–thus cutting out the need to have the federal government as a middle-man.

How much would it cost to use roads under a vehicle-mile fee system? Americans drive nearly 3.0 trillion vehicle miles per year, and current revenues from gas taxes, tolls, vehicle-registration fees, and other user fees are about $120 billion per year, or about 4 cents per vehicle mile. Of course, trucks and other heavy vehicles would pay more; motorcycles and other light-weight vehicles might pay a lot less; people driving on more heavily used roads might pay less because they share the cost with more users, while people on lightly used roads might pay more.

Nearly all of the opponents to vehicle-mile fees express fears that government will invade people’s privacy. But this is a red herring. None of the dozen or so pilot projects that have been planned to date would allow anyone to keep track of where people go or when they go there. All they do is record how much people spend as they use the roads. People concerned about privacy should worry more about telephones and credit cards, where the government actually does invade people’s privacy.

Vehicle-mile fees would be a true user fee if the money went to the roads that users drove on. They would be a tax if the money went to transit or some other program, especially if the fees were set at a punitive level designed to reduce the amount of driving people do. As a user fee, vehicle-mile fees would increase mobility and, in the long run, reduce the cost of travel. As a tax, they would increase the cost of travel and limit mobility to the wealthy.

While it is nearly certain that Blumenauer and I disagree about where the funds collected from a vehicle-mile fee should go, I welcome his support for replacing gas taxes with such fees. Once we get people over the hump of accepting a shift from gas taxes to vehicle-miles fees, then we can argue about what level of government collects them and how to make sure they are spent where they are most needed.