Ready To Be Taxed By The Miles You Drive?

Rumblings in Washington D.C. and states point to a new way to pay for roads and bridges.

Hate gas taxes? Want elected officials to roll the ones we have back for the summer? Cringe at the thought of European-style gas taxes that make petrol $8 a gallon and more?

Rest assured that none of our elected officials in Washington are openly entertaining any of those measures as a means of reducing the Federal deficit. For now.

But there is an idea kicking around the halls of Congress, the White House and several statehouses that might eventually seek to tax car owners based on the number of miles they drive. The more you drive, the more you pay.

The White House in May quietly began circulating a "legislative proposal" that includes a provision to tax consumers for every mile driven. After word leaked out, White House officials nearly pulled hamstrings back pedaling, insisting that for now, it is not a policy the White House will pursue in the near future. If it is eventually advanced, though, it could prove to be even less popular than the current proposals to cut Medicare.

Taxing for every mile driven is an idea that has been floated before, mostly notably by Department of Transportation (DOT) Secretary Ray LaHood in 2009 as a means to beef up revenue for highway improvements.

The current federal proposal, named the "Transportation Opportunities Act," indicates the Obama administration's interest in the idea of making drivers pay to drive on roads that are are not already tolled.

A spokesman for the DOT dismissed the Act as unofficial: "This is not an Administration proposal," said spokesman Justin Nisly. "This was an early working draft that was never formally circulated within the Administration, [and it] does not take into account the advice of the President's senior advisers or Cabinet officials, and does not represent the views of the President."

Raising the gas tax or proposing a tax on miles driven can often be political kryptonite -- an especially important consideration as the 2012 election approaches.

The White House previously disavowed a similar proposal floated early in Obama's presidency, with then-spokesman Robert Gibbs saying then that a mileage tax "is not and will not be the policy of the Obama administration."

Nonetheless, the floated document exists for a reason, and that is to stir debate on the topic.

More fuel efficient and electric cars stirring debate on driving tax

Believe it or not, one of the reasons the per-mile tax is an idea at all is the growth of electric and hybrid vehicles, as well as the fact that all vehicles are becoming more fuel efficient. Washington State and Oregon, for example, are proposing "use taxes" on electric vehicles that don't pay gas taxes, which fund road maintenance. The proposal would levy a $100 flat-fee on those who opt for electric vehicles.

Not everyone dislikes the per-mile tax idea.

"Whatever's happening in vehicles per miles traveled, it's a lot better than what's being proposed which is, 'Let's single out EVs and punish them with a flat use tax,'" said Diarmuid O'Connell, vice president of business development at Tesla, maker of luxury electric vehicles.

In Oregon, it is viewed as a fairness issue by Sen. Bruce Starr, R-Hillsboro, a proponent of the bill in that state that would charge EV owners a fee. They're using the roads, even though they don't pay gas taxes, he argues. "Everyone else is paying, so why should they get a free ride?" he said.

The Portland measure would charge drivers of electric and plug-in hybrid vehicles up to 1.43 cents for each mile they drive beginning with cars from the 2014 model year. That's about $172 per year for a car driven 12,000 miles, and about the same as the gas tax paid for a vehicle that gets 21 mpg.

Tax starved road improvement projects leave crumbling roads and bridges

More revenue has to be raised to maintain roads, bridges and tunnels, and the per-mile tax strikes many as being a more equitable and progressive way to fund improvements than gas taxes. Gas taxes, notoriously hard to increase legislatively, have lost about one third of their real value, says a Congressional Budget Office report. In recent years, the money available in the highway trust fund hasn't been enough to cover even today's insufficient federal spending on highways, requiring an additional $30 billion or so a year to be injected from the U.S. Treasury.

California's gasoline tax, for example, increased from 7 cents per gallon in 1970 to 18 cents in 2009, but the real revenue per mile of travel - after figuring for inflation and improved fuel economy - dropped 70 percent, according to research by the RAND Corporation, a California think tank.

The nation's highway infrastructure is crumbling, especially in states that see freeze-and-thaw winters and are forced to treat their roads with corrosive salt, which plays havoc on roadways even while making them safer to drive on during icy conditions.

Some countries have already adopted the per-mile tax. In Singapore, for example, devices in each car already track how far a car has been driven and the government charges the driver per mile driven. The device is similar to the E-ZPass boxes many drivers have in their vehicles in order to get through tolls faster. The E-ZPass box records when the vehicle has passed a toll, and the consumer pays off a monthly bill via a create card rather than paying per toll. The same box could be programmed to log miles and bill accordingly.

Besides the average citizen who will probably squawk at the idea of a "driving tax," many environmentalists don't like the tax, and would prefer to see gas taxes. Why? If drivers are taxed by miles driven, there is no incentive, other than spikes in gas prices, for the owner of an SUV to trade down to a hybrid, electric vehicle or more fuel efficient gas vehicle. Only the penalty of consistently high gas prices at the pump seems to move consumers to make such choices on a large scale.

Bottom Line: Legislative proposals are trial balloons, designed to attract debate and comment. So a per-mile tax is a long way from becoming law. But the economic trials faced by states is a reality, and roads, bridges and tunnels are crumbling, especially in the Northeast, Midwest and Great Lakes states. Extra fees or taxes are inevitable. This idea is a lot more digestible than steep gas taxes if consumers look at it rationally.

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