Pete Buttigieg piqued the interest of urbanists– again- when he suggested a vehicle-miles-traveled (VMT) tax as an alternative to the gas tax. Interest in this has been growing over the years for two simple reasons. First, the federal gas tax hasn’t increased for decades. Indexed for inflation, it’d be about double today what it was in 1993. In the meantime, cars have become increasingly electrified and increasingly fuel-efficient. Should Teslas get a better deal on driving because their owners are richer? Ideally, no. There is some social benefit to switching from an ICE to an EV– but electric cars aren’t going to solve the climate crisis. So, VMT is attractive. But still, as a part-time policy wonk who has studied regulatory law, compliance, and governance, I’m loath to suggest anything that would substantially complicate transactions and tracking systems. It’s worth considering a few approaches here.
Infrastructure Finance 101
Taxes and user fees are the two main ways that we finance infrastructure. There’s often some overlap between the two, depending on sources or uses. Tolls are user fees. Gas taxes are at least meant to be a user fee and are often assessed at both state and federal levels. Many jurisdictions divert a portion of lucrative gas taxes and tolls to fund things other than roads. In some ways, this is the point– funding transit through tolls creates a disincentive to driving, but it also helps fund transit.
User fees and taxes both come in different flavors. With respect to transportation, taxes can be tied to real property (like TIF or PACE) or sales taxes (local options). Sales taxes are effective but regressive. Property tax increases as value capture seem to be limited in their deployment thus far in North America.
Hardest to implement, high impact: National tolling
If it were up to me– and, well, it’s not- I’d say we toll every damn thing. Clearly, this isn’t going to happen. The refrain goes something like: “It is my God-given right to drive on as many publicly-financed roads as I want! And nobody’s gonna tell me otherwise!” But for real, it would be a great disincentive to driving. A portion of revenues could also be used to fund things like intercity transit routes for Amtrak– or local transit systems. Creating a system that hybridizes toll-by-plate and transponder-based open road tolling would eliminate the massive operating costs and physical footprint of tollbooths. We could have nice things. We could.
There are some things that tolling doesn’t fix. If people stop driving on toll roads, this will create congestion on local roads. These roads will, accordingly, not necessarily enjoy the revenues from tolling. This can be addressed through policy and traffic analysis, but it’s a point worth raising.
Hard to implement, high impact: VMT Tax
VMT tax requires tracking of car data, which raises privacy concerns. Telematics have been used in insurance for decades. GM introduced what would effectively become the OBD system we now know via technology used in manufacturing quality control in the 1980’s. This was quickly standardized and adopted across the entire industry. But OBD’s adoption for use in insurance has been relatively limited– think Progressive Snapshot. This actually began in Italy in the 2000’s, where insurers sought to crack down on fraud and improve centralized database systems. There are a lot of cases for why it’s good. But it’ll be hard to implement because it requires mandatory universal participation from a populace wary of such things.
In The Daily Signal, David Ditch seems to fundamentally misunderstand how VMT tax would work. Progressive Snapshot doesn’t use GPS. It communicates with your cellular telephone. Odometer readings would be hard to implement because they’d only be able to be verified annually. Various states are already experimenting with this, like Utah and Oregon. Rollout– and therefore success- has been limited.
Easier to implement: increased gas tax
The problem with the gas tax is that it’s, well, mildly regressive. It doesn’t penalize Tesla owners who can spend $80,000 on a Model S. Lower-income commuters who lack access to public transit get screwed. But it’s not as regressive as Leftbook urbanists think. A $40,000 Tesla Model 3 is the same price as a $40,000 gas-guzzling truck. There’s no reason why most people need to drive a $40,000 gas-guzzling truck. Or SUV. Or Subaru, for that matter. Plus, it’d be possible to use revenue from a maybe-lil-bit-regressive gas tax to fund things that are progressive. Like fixed-route transit. Or demand response transit. The list goes on forever. I don’t buy the idea that “gas tax bad” because it’s reductive. Internal combustion engines create pollution. Pollution is objectively bad. Gas taxes can fund things other than cars that benefit everyone.
Most comprehensive… a carbon tax? Lol jk… …unless?
Want to reduce VMT, gasoline usage, and overall carbon footprint? Just implement a national carbon tax. This would reduce all of the granular complexity that would ripple out from things like VMT or other taxes. This addresses the “VMT vs. gas tax” divide. Fuel sources would be taxed based on how much carbon they produce. Taxing at the source means you’re equitably taxing everyone based on their carbon production. So, a Tesla powered by coal-fired power generation would still be taxed “appropriately.”
Distribution of benefits, in an actual trickle-down
In general, the closer you get to the source, the better distributed the effects of a policy change are. But in the case of carbon, this becomes a monumental undertaking that would have to take place across the entire economy. Can’t Take Away Mah Freedom! Carbon dioxide is a conspiracy of George Saros And Her E-mails [sic]! But as it turns out, even Republicans have supported carbon taxes. Wrote Josiah Neeley for R Street:
What’s most new and interesting about the Rooney bill is the way the revenues are used. The bill provides that the bulk of the money raised will go to support cuts to payroll taxes. Additional money would be used to fund state block grants, weatherization and energy research and development.
This “tax swap” would help to resolve one of the perversities of the current tax system. When you tax something, you tend to get less of it. That’s the idea behind taxes on cigarettes, for example. Yet America currently imposes heavy taxes on things like jobs and savings that we ought to want more of. Swapping taxes on things we want to encourage for things we want less of should be common sense.
The tax swap is an enormously attractive proposition. Our tax code is unequivocally, well, fucked. Anything that could reduce taxes in a progressive fashion by taxing carbon would, in my estimation, be a win. But remember that whole debacle in Oregon, where Republican legislators literally hid to avoid voting on a carbon tax? Yeah, that happened. Anyway, the VMT tax also appears to be dead on arrival. The Right will be happy. But at least we have a transportation secretary who’s thinking about these things.