A Free-Market Energy Blog

At last! A good idea from Team Obama! (A user fee in place of gasoline taxes)

By Kenneth P. Green -- February 20, 2009

An endangered species – a market-friendly idea – was spotted recently in an interview with Transportation Secretary Ray LaHood: The Obama appointee is considering replacing gasoline taxes with a tax on vehicle-miles-traveled (VMT) as a means to fund highway and transportation infrastructure maintenance. He asserts that this kind of “outside the box” thinking will typify the Obama administration’s initiatives (Something to be devoutly hoped for).

If they actually replace the gas tax with a VMT tax, rather than piling on, it would be a great improvement in terms of infrastructure maintenance, as a person’s impact on highway infrastructure is proportional to miles-driven, rather than gasoline consumed. A gas-guzzler driving 1,000 miles does the same damage to the highway as a fuel-sipper that drives 1,000 miles, unless they are radically different in weight class. Heavy trucks, those used to transport most of the nation’s goods, are even harder on the surface of roadways.

Taxing VMT is a step toward a user fee for roadways, which is an idea long championed by market-oriented transportation analysts. Better still would be to have those taxes collected locally, by a private entity, which has the responsibility for maintaining good performance of a given stretch of highway. Of course, it’s rather unlikely that the word “privatization” will be permitted to leave the lips of anyone in the Obama administration, but a person can dream.

There are legitimate concerns about privacy, as the scheme involves having a GPS transponder record one’s mileage. In theory this can be done without actually recording where a person goes, and diligence on the part of civil libertarians will be needed to ensure that the system is limited to furnishing a mileage count, and not a route map. Police departments, always on the look out for more Orwellian tools to track people’s lives are the big threat here. On the other hand, with surveillance cameras everywhere, it’s only a matter of time before they just LoJack everyone, as in the very under-appreciated anti-authoritarian movie Demolition Man.


  1. Robert Dammers  

    I have to disagree. Road wear rises as the fourth power of axle weight, so is very strongly influenced by the overall weight of the vehicle. Fuel consumption is a less inappropriate proxy for the combination of weight and miles travelled (which are what contribute to the societal cost of driving) than miles travelled alone. If taxes were genuinely based on damage to roads, a lightweight vehicle like a Fiat 500 would essentially pay nothing, while a much heavier vehicle like our Toyota Previa would pay a lot. Either way, fuel taxes are closer to “fair” (whatever that means in this context) than mileage.


  2. jae  

    Oregon is deep into this thinking, and I think it is nuts (wrong). It penalizes those who save resources by buying efficient cars–exactly the opposite direction we need to go!


  3. Brian  

    There’s no need for GPS.

    Iowa, for instance, assess a registration fee for vehicles based on weight of the vehicle. Add a line for “odometer” reading, and ta-da, you have all the data you need.

    Thinking of cheating? Require title transfers to capture the odometer reading, and you would have to pay the difference on way or the other.


  4. Tom Tanton  

    The issue of privacy/tracking movement may be simple to resoilve. Every vehicle has an odometer, and most everywhere requires some periodic inspection. Just take readings when inspected and report. That way, taxes are applied to actual mileage but nobdy can tell “where.” It does raise the issue however of cash flow for the taxing entity, but not significantly as vehicles are inspected throughout the year.


  5. BKR  

    As you can imagine we have tried this in Sweden (we tax everything in sight, whether moving or not; pedestrians are next in line). The Km-tax was abolished. But, as you can imagine, there are people here that like to introduce it again. To a first-order approximation, separate efficiency and equity => tax externalities only.


  6. Andrew  

    Whether this is a good thing, I would argue, depends on how much you drive. I’m guessing you don’t do much driving.


  7. Texas Jack  

    Sounds like a great idea if you live in one of those tiny things they call states in the northeast, but not so good if you want room to breathe. The distances we cover here in Texas are orders of magnitude greater than equivalent trips in Rhode Island, or New Jersey, or Delaware, for example.
    I drove 450 miles this weekend to attend some club races. A friend drives 92 miles a day to and from work. Another covers 70 miles round trip. There are no trains or busses that make these trips; the only way is by personal car.
    How about we double the cost of bus and train fares instead? Busses are heavy and do much damage to the roads, and trains are already subsidized by the government anyway. Why should we automobile drivers have to pay for them?


  8. ml  

    “trains are already subsidized by the government anyway.”

    And exactly who pays for that road you drive on?


  9. techreseller  

    I would like to emphasize the points made by many of the other responders above. It would have to be a variable tax based on weight. Put a range in, say 0-2000 pounds, 2001-3500, 3501 to 5000, on up the scale. And make it match the power of the weight’s effect as stated by Robert Dammers above.


  10. blackrockmarauder  

    I think that it should be voluntary where people have a ledger between fuel consumption and distance traveled. Everyone pays the standard gas tax at the pump, but those who opt into this program are reimbursed the lesser of the two (or maybe the greater or maybe just the fuel portion). Still…something doesn’t seem quite right about the way I formulated it. Probably dumb, right?

    I would rather keep it voluntary and that is why I propose this. Though it may complicate future formulation of taxes based on infrastructure needs.

    This isn’t my specialty, I am just floating ideas out there.


  11. Zilvinas  

    OK, what about weight times distance traveled as an indicator for tax? Sth. like pound-mile or gram-metre.
    As for people who have to drive far – well, that is you own personal choice. In free market personal choices should be financed from personal income. On the other hand you shouldn’t worry. If you drive lot you still pay a lot in gas tax anyway.


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