During his presidential campaign, Pete Buttegieg endorsed mileage‐based user fees to pay for infrastructure. This idea has been getting more attention now that he has been confirmed as Secretary of Transportation. Such fees have also been supported by fiscally conservative groups including the Reason Foundation and Cato Institute.
Liberals such as Buttegieg and fiscal conservatives such as Reason and Cato support such fees for incompatible reasons. Fiscal conservatives view user fees as a more equitable way of paying for roads, as people would pay for only what they use. Liberals see them as a new source of tax revenues that they can spend on transit and other inefficient programs.
Notice that I distinguish between user fees and taxes. With user fees, users get what they pay for; with taxes, someone else gets what the users pay for. Gas taxes that go to the roads we drive on should be known as highway fees; any such fees that are spent on transit, though, are taxes.
Gas taxes as highway fees made sense in 1919 when my home state of Oregon became the first state to dedicate such taxes to roads, as they were much less expensive to collect than putting toll booths on every street and highway. Since the development of electronic methods of collecting tolls, however, gas taxes have been revealed to have several disadvantages.
Unlike most taxes, gas taxes don’t automatically adjust for inflation, nor do they adjust as motor vehicles become more fuel‐efficient. Gas taxes mainly cover state highways, not local roads, so cities and counties resort to property or other regressive taxes to pay for local roads and streets. This is doubly unjust because higher‐income people tend to drive more than low‐income people.
Most importantly, gas taxes don’t do anything about congestion, which results from poor road pricing and costs Americans at least $200 billion a year. Roads are unique in that their throughputs decline when they become congested, so better pricing could actually double the number of cars that can use roads during peak periods. In effect, instead of taxing people off the roads as some critics fear, better pricing would actually tax people onto the roads.
Replacing gas taxes with mileage‐based user fees can solve all of these problems. The main objection to such fees is that they could allow the government to track where and when people travel, but there are several ways of collecting such fees without allowing such monitoring.
Just as Oregon pioneered the gas tax, it is now pioneering a mileage‐based fee system and I have been a part of this system for several years. A GPS device in my car tells a private company how many miles I drive within the state. After deducting the gas taxes I paid, the company bills me for those miles and gives the money from all such users to the state transportation department. The state doesn’t know where, when, or how much I drive, and I have a choice of GPS providers all of whom promise to keep my information private. That’s just one way to protect privacy while collecting per‐mile fees.
Infrastructure that is paid for out of user fees, such as state highways, tends to be better maintained than infrastructure paid for out of general funds, such as local roads. The agencies managing the user‐fee‐funded infrastructure know that their revenues depend on the quality of service that they provide.
Currently, a disproportionate share of structurally deficient bridges and crumbling roads are locally owned, while the state‐owned ones tend to be in excellent condition. Mileage‐based user fees would fix that problem.
Mileage‐based user fees would bypass the need for federal involvement in highway funding. The justification for the federal fuel tax is that it is collected at the refineries and ports, which is much less expensive than collecting it at every gas station. Mileage‐based user fees offer no such advantage to the federal government.
However, it is critical that such fees be dedicated to highways, roads, and streets, and not diverted to build obsolete light‐rail lines or subsidize other archaic infrastructure. Currently, about 20 percent of federal and state gas taxes are diverted to transit and other non‐highway programs and the result is an incredible amount of waste and inequity.
Calculations based on 2019 Department of Transportation data show that it cost five times as much to move someone a passenger mile by public transit as by the average automobile. An Oregon transit agency is currently spending $108 a rider subsidizing one rail transit line.
This is particularly inequitable because transit commuters have the highest median incomes of any commuters in the country. Just 5 percent of people who earn less than $25,000 a year took transit to work in 2019 while nearly 7 percent of people who earn more than $75,000 a year commuted by transit. This means that 95 percent of low‐income workers disproportionately pay through gasoline and other taxes for transit rides taken by high‐income workers.
Some states have constitutional requirements that gas taxes can only be spent on highways, roads, and streets. For mileage‐based user fees to work, more states should apply similar constitutional limits to such fees.
Whether we’re talking about groceries, clothing, housing, or other consumer goods, American prosperity is built on user‐fee‐driven systems that provide both users and producers with feedback about the value and cost of goods and services. Transportation should rely on similar systems, and mileage‐based user fees are the best possible way to pay for roads.