Thoughts at a Workshop On Replacing CA’s Gas Tax With a Mileage Fee

In 2017, California plans to pilot a new mileage-based Road User Charge designed to potentially replace the current state gas tax. Photo Wikimedia

Earlier this week, I attended a California Sustainable Transportation Funding Workshop, hosted by Caltrans, Southern California Association of Governments (SCAG), the California Transportation Commission (CTC), and the Mileage-Based User Fee Alliance (MBUFA). The half-day program focused on how the state of California could shift from our current gas tax funding stream to one based on a per-mile fee.

Let me first say that I usually mostly hang out with a bunch of left-of-center city people like me; we get around mostly by bicycling and walking. My friends and colleagues tend to support the idea of a per-mile fee, because we expect that it could help motivate people to drive less, and use other modes more.

This workshop wasn’t populated by a bunch of people like me. I don’t think anyone else arrived there by bicycle. As far as I could tell, it was primarily people who are more mainstream: people who drive and who, for the foreseeable future, expect our car-centric transportation system to look more or less like it does now. Among the program’s sponsors was the libertarian Reason Foundation.

What was interesting about the workshop was where the left and the right agreed: gas tax revenues aren’t enough to cover transportation infrastructure costs, and per-mile fees could work better. Similar right-left agreements occur with some Shoup-inspired parking reforms and Express Lane toll programs.

California's Gas Tax
In 1994, California’s Gas Tax was set at 18 cents per gallon. It remains unchanged today, but, due to inflation, that 18 cents is now worth about 11 cents. Graph via Caltrans

Speakers at the conference set the stage by describing the situation, which they described as “The Federal & California Financial Cliff.” The federal gas tax is 18.4 cents per gallon. The California gas tax is an additional 18 cents per gallon. These amounts were set in the early 1990s. Unlike percentage-based sales taxes, which fluctuate with price changes, the gas tax remains at a flat rate. Since the ’90s, inflation has effectively reduced California’s gas tax to its lowest inflation-adjusted level since California gas taxes began in 1923.

Gas taxes are dedicated to be spent on transportation only. As the gas taxes lose value over time, governmental transportation budgets are increasingly subsidized by other taxes paid by everyone, including sales taxes, property taxes, etc. Recent estimates show that only about half of overall transportation funding is paid for by dedicated gas tax revenues. To some extent, this is fair: even non-drivers derive some benefits from highways, because everyone buys goods shipped by truck. The unfair aspect of this system is that non-drivers’ taxes go, in part, to freeways that non-drivers do not use.

Transportation leaders are generally aware that general funds subsidize transportation expenditures, but many drivers assume that driving-based taxes are what pays for roads. Many drivers, though already subsidized by non-drivers, still think they’re paying too much.

There are at least three more factors that influence the gas-tax-income vs. transportation-expenditures mismatch. 

Gas tax revenue fails to keep pace with vehicle miles traveled. Caltrans’ chart illustrates that link well, but ignores recent trends in declining VMT. Graph via Caltrans

One factor was what conference presenters called the “problem” of increasing fuel efficiency. Due to legislative mandates and market forces, cars get more miles per gallon today than before. Fuel efficiency is good for drivers’ wallets and reduces the harm that driving does to the environment, but it means people pay less in gas taxes. At the workshop, CTC Vice Chair Lucy Dunn criticized hybrid and electric vehicle drivers for not paying their fair share and burdening taxpayers.

Here are two more exacerbating factors that were not mentioned at the workshop:

  • Nobody mentioned recent declines in vehicle miles traveled (VMT.) The Reason Foundation’s Adrian Moore actually promoted mileage-based fees in part because they will “grow along with VMT.” Nationally and in California, per-person VMT has declined since 2004. This is throwing off traffic predictions, resulting in even less gas tax revenue than agencies anticipated. It has resulted in declining toll revenues and toll authority bankruptcy.
  • As Chuck Marohn at Strong Towns has emphasized, transportation infrastructure maintenance costs are gradually increasing. It seemed like a good investment for states and cities to build all kinds of big highways and roads with “free” federal monies. But, as infrastructure ages, maintenance costs come due.

So, as costs grow and dedicated income shrinks, the need for other revenue increases. This can mean drawn-out political battles. With limited government dollars, Mr. and Ms. Public, what would you rather fund: More roads? More police? More education? More parks?

Transportation agencies enjoyed more than half a century of relatively flush and entirely dedicated budgets. Now they’re facing competition, with shifting political winds often meaning leaner budgets. This uncertainty makes planning and financing more difficult, and destabilizes not only agencies, but also the private industries that count on governmental contracts.

What’s in the future? The folks assembled at the workshop, and many others, think it is Mileage Based User Fees (MBUFs.)

MBUF is also called VMT fee, VMT tax, or a per-mile charge. 

Generally, this would work by charging drivers some amount of money for every mile they drive. In the initial switch-over from gas taxes, this could be done in a revenue-neutral way. As of July 2015, Oregon will start a permanent program wherein some drivers will voluntarily switch from paying the state gas tax to paying a 1.5 cents per-mile charge. This amount corresponds to Oregon’s average gas tax per mile driven.

Being revenue-neutral, this would not, on its own, solve the budgetary shortfall. It could, perhaps, stop the hemorrhaging – meaning that mileage fee revenues would not decline quite as dramatically as the gas tax revenue has been declining. Mileage fees bring fuel-efficient vehicles back into full-paying mode. To fully stop the hemorrhaging, though, the new MBUF would need to be indexed to inflation, in which case it would only be revenue-neutral on day one.

California is moving forward with a per-mile fee pilot. The legislature and governor recently approved S.B. 1077, which authorizes a “Road User Charge” program as an alternative to California’s gas tax. Caltrans and the California Transportation Commission are currently assembling a technical committee to direct the implementation process. The pilot program is scheduled to begin operation in January 2017.

Will a mileage fee make a big difference?

Many of the workshop speakers, who seem invested in retaining current car-centric systems, seem convinced that MBUFs are key to continuing the status quo.

Many of my livability-seeking friends think MBUFs would help a shift toward livability.

The truth is likely in the middle somewhere, and the devils will be in the details. It is also possible that any effects MBUFs cause could be overwhelmed by other forces. Mileage fees could be outweighed by increasing gas prices, declining VMT, millennials’ behavior, technological advances, mode shift trends, global warming, or other unforeseen circumstances.

Though workshop speakers seemed very confident that MBUFs will take hold in California and will someday replace our broken gas tax, the future of MBUFs past the 2017 pilot is unclear.

  • BJToepper

    Was there any talk of charging cyclists VMT fees? Also, did the idea of vehicle weight factor into the VMT equation?

  • 94110

    VMT seems like a really bad idea. Streetsblog has written about the “fourth power rule” before. In essence the cost of accommodating a given rule is strongly tied to its weight. Even the average speed of travel is likely to be a bigger factor than the distance traveled.

    Gas tax weakly encourages more fuel efficient vehicles. VMT would likely remove this encouragement and cause public expenses to go up.

    This seems academic to me. The only way VMT seems to logically make sense is if you believe an electric car should pay as much as a two ton SUV.

    Please, by all means, explain why I shouldn’t be vehemently opposed to VMT “from the left”. An article which doesn’t mention the fourth power rule on this issue just isn’t compelling.

  • Captain Beefy

    Why on god’s earth would cyclists need to be charged? They cause ZERO impact on the environment or on infrastructure.

  • Joe Linton

    No – the word “bicycle” didn’t cross anyone’s lips at that workshop. Vehicle weight wasn’t mentioned either.
    My hunch: cyclists’ sales taxes and property taxes will continue to subsidize transportation budgets that are 99+% non-bike-expenditures – because there isn’t sufficient political will to raise a mileage fee (or gas tax) to the level where it would fully cover transportation budgets. (Raising these would make driving more expensive, triggering a feedback loop where people would drive less, too!) Bike facilities are cheap. Bike impacts on maintenance are minimal. So we cyclists will continue to subsidize driving costs… and, as I mentioned in the article, that’s ok – most of us do drive now and then, and we all buy stuff that was delivered by truck.

  • Kevin Love

    “As of July 2015, Oregon will start a permanent program wherein some drivers will voluntarily switch from paying the state gas tax to paying a 1.5 cents per-mile charge.”

    My crystal ball shows that those who voluntarily switch will be disproportionately drivers of huge gas-guzzling SUVs. Making the program very much not revenue neutral.

    The solution to the problem is simple. Raise gas taxes to cover the construction and maintenance costs of roads. And police, fire and ambulance services for car drivers. And the health-care costs for people poisoned by car pollution.

    If (shock!) actually having to pay their own way instead of being free-loading parasites means car drivers do less driving, somehow I will avoid drowning in my river of tears.

  • Joe Linton

    Read about the Oregon program here http://usa.streetsblog.org/2013/09/24/ten-questions-and-answers-about-oregons-new-vmt-charge/ (link is in article) – it’s not open to gas guzzlers.

  • Joe Linton

    Here’s how the OR folks respond to your question: Does a tax on fuel-efficient vehicles punish people doing the right thing? Most Oregon legislators — and the public — get that it’s no punishment to pay $150 for 10,000 miles of driving in a year. (The VMT rate was set at 1.5 cents per mile to roughly match the cost of Oregon’s 30-cents-a-gallon gas tax.) “You don’t buy a highly fuel-efficient vehicle to save $150,” he said. “You get it to save on fuel costs,” which can amount to hundreds or even thousands of dollars a year in savings. Besides, making the great choice to buy a less polluting vehicle doesn’t make it a great choice to let the road system crumble, says Whitty.

  • 94110

    I read about Oregon’s system when it happened, but don’t remember much. It seemed to be more an experiment than an attempt to really make a change.

    I haven’t read anything about S.B. 1077 yet.

    A change to VMT can be revenue neutral, or it can increase revenue (or decrease revenue which it looks like is no one’s idea). If it is revenue neutral it either shifts the burden towards efficient cars or gas guzzlers.

    When I think “miles traveled” I think “trying to tax efficient cars”.

    Maybe this is all just political double speak. Call it a “tax on gas guzzlers” and I’ll support it. Call it a “vehicle miles traveled fee” and you are going to have to explain in minute detail how this encourages more efficient vehicles.

    So far the emphasis I’ve seen has been “Wah! Wah! Electric cars and Priuses aren’t paying their fair share!” (With the exception of Oregon where I’m not sure what the benefits are.) This sounds like the same misguided argument for taxing bikes.

    There are two problems with the gas tax: 1) It isn’t high enough and 2) It doesn’t scale exponentially with weight/GPM. Revenue neutral wouldn’t fix number one, and VMT might be worse than number 2.

    Thank you for going to this meeting and bringing back the scoop. Doesn’t mean I’m partial to the koolaid they’re serving.

  • Kevin Flanagan

    Because god didn’t pave the earth, we did. Imagine a totally car free L.A. (a.k.a. heaven!). The cyclists will still want the potholes fixed. They won’t happen as often, but they’ll still need repairing when they do. Sun and weather will still age infrastructure, even without the pounding of cars. Now as a MTBer I’d be super happy riding crumbling roads everywhere, but that won’t suit everyone.

  • Alex Brideau III

    I’d equate the minimal impact bicycles have on road maintenance to the impact a pedestrian has on sidewalk maintenance.

  • murphstahoe

    I want dirt roads

  • Kenny Easwaran

    I suppose if the gas tax is really being thought of just as a “usage fee”, then something like VMT is a more egalitarian way to charge that fee. Better yet would be something that takes into account the weight of the vehicle (or a simple proxy like number of axles). But it should be raised to the level where it actually pays for the roads, rather than paying for at most half of the roads, as it currently does.

    But really, a VMT tax is just like a congestion fee that you pay no matter where you drive. If you’re going to charge people per mile of road they use, it would be better to charge them more for using scarce roads like Wilshire Blvd, and charge them much less for using a low demand street. Why do it through the VMT mechanism at all?

    Regardless, we would still need a tax on gas, to account for the negative externalities of fuel use. Perhaps the California cap-and-trade fees will already take care of that.

  • 94110

    Just read S.B. 1077 and re-read the Oregon article. First, from the Oregon article: “Why would anyone choose to participate in the program? That’s a question Whitty couldn’t really answer yet.” Not out of context. For 3500 people they are essentially doing it for charity. 1500 people (capped) are getting a price break out of it.

    S.B. 1077 is very vague. It creates a committee to study the issue with essentially three guidelines:

    Fuel efficiency has been bad for revenue.
    Mileage based is the new hotness.
    If you don’t say “privacy” often bad things will happen.

    It does not mention weight (an exponential factor in road damage) or speed (a linear factor). Nothing seems to preclude beneficial pricing for lighter vehicles either.

    http://en.m.wikipedia.org/wiki/Fuel_taxes_in_the_nited_States

  • Kid Charles

    Here’s a thought: just raise the gas tax as high as it needs to go to pay for infrastructure. If there’s more efficient cars on the road, raise it to compensate. Let those who use more gas pay more to punish them for the externalities they cause. Let them subsidize those who cycle and use more efficient vehicles. Why is the transit community so quick to abandon this in favor of VMT? I think it’s a case of political cowardice, buying into the “raising the gas tax is a political non-starter” meme.

  • 94110

    The gas tax numbers in this article may be wrong. They conflict with this: http://en.m.wikipedia.org/wiki/Fuel_taxes_in_the_United_States

  • Joe Linton

    that article includes sales tax – it says “The American Petroleum Institute uses a weighted average of local taxes by population of each municipality to come up with an average tax for the entire state. “

  • Micheal Pucci

    Till it rains

  • rdm24

    A mileage fee sounds like a very big hassle, not at all worth its supposed benefits. Are we going to force people to report their mileage and charge them a surprise fee when they renew their registration? How do we know if miles were driven in-state? Are we going to put monitors in people’s cars? A gas tax has none of these problems.

    One of the comments said it well: A mileage tax is a tax on efficiency.

  • rdm24

    Has anyone studied the relative contributions of traffic versus weather on pothole formation? I imagine that in some cases, natural wear may be largely to blame, while in other cases, it’s traffic.

  • rdm24

    Nobody has zero impact.

  • 42apples

    I believe vehicle weight is a major concern with a VMT fee. People have mentioned before that road damage is proportional to the fourth power of axle weight, so really most of the damage is done by large trucks and small passenger cars contribute little to maintenance costs.

    I think that there are three main externalities with automobiles that need to be addressed: pollution, congestion, and road wear-and-tear. Smart VMT taxes would start by proportionally charging based on vehicle weight (this should be easy to determine from vehicle registration). Congestion charges should be added on based on real-time traffic levels. This would also cover the cost of constructing new lanes, which should be built based on peak travel demand. Pollution charges would be harder to address, but I’m sure there is some way to at least measure regional potential for total air-quality damage (for example, dense cities would usually be very high due to a large affected population).

  • traal

    A mileage fee isn’t an equitable way to pay for the externalities of gasoline. Only a gas tax can do that.

    A mileage fee also isn’t an effective way to prevent traffic congestion and thereby save taxpayers money. Only a congestion charge, express tolls, and/or market-rate parking can do that.

    The only thing a mileage fee is good for is to pay for the roads, especially if a portion of it is proportional to the 4th power of the weight of the vehicle to pay for damage to the pavement caused by the vehicle.

    So the optimal solution is to keep the gas tax to pay for air pollution and climate change and provide the proper incentive to avoid fossil fuels, add something that varies by the time of day to permanently eliminate traffic congestion and save taxpayers money on infrastructure, and add a vehicle weight-based mileage fee to pay for road construction and maintenance and provide the proper incentive to drive lighter vehicles that cause less damage to the roads.

    In other words, don’t get rid of the gas tax. Lower it and supplement it with other taxes and fees that completely pay for each person’s incremental burden on infrastructure, traffic congestion, and climate change.

  • andrelot

    Why would average speed impact more than miles traveled? Makes no sense from an engineering point. Yes, building a roadbed that accommodate faster traffic costs a bit more, but just a bit. The weight-load is where damage really happens.

    Speed only becomes more of a factor on really steep grades.

  • SuperQ

    This. A hybrid approach of having gas tax + VMT tax(Gross Vehicle Weight adjusted) is much better. This would help with the increase in plug-in hybrids and electric-only cars. They tend to be very heavy.

    Here’s an interesting question. I looked around on google quickly, but I can’t find an average US vehcile GVW history chart. It would be very interesting to know.

  • SuperQ

    Actually, many electric vehicles are very heavy. The Tesla Model S has a curb weight of 4647 lbs. A Ford Explorer has a curb weight of 4563 lbs.

    Really, we need a hybrid VMT + Gas tax.

  • Reason Foundation = Petroleum

    The oil shills, such as Adrian Moore of the Reason Foundation (funded by petroleum companies) are the ones pushing this nonsense. If the gas tax is bringing in less revenue, than increase the gas tax. The switch to a mileage tax is nothing more than a ruse to increase oil company profits, by once again making the public at large pay for the damage done to our environment by petroleum use.

  • 94110

    I’ve heard speed is roughly a linear factor, which would put it on par with distance. My thinking when I wrote that was that city driving vs highway driving is often a factor of three in speed.

    With that as a constant between two drivers a city driver who drives twice as far at 25 as a highway driver drives at 75 would have less of an impact.

  • 94110

    I hadn’t checked curb weight on the Tesla. Weight is absolutely an issue with electric cars (and hybrids, to a lesser extent). I just hadn’t realized quite how high their curb weights were.

    Sounds like those knee-jerk “electric cars aren’t paying their way” activists do have a leg to stand on.

    Overall I think the upshot is we need a VMT fee that scales according to weight in addition to a Gas Tax. Also, no one in this thread is asking for a revenue neutral “solution”.

  • Andy B from Jersey

    Just raise the damned gas tax!!! It’s so damned efficient as it’s just tacked on a gallon of fuel. Mileage based taxes seem like they will just add a grossly inefficient bureaucracies tasked with collecting all this data. It also sounds like its a tax that would be prone to cheating and/or scheming. If you want to driver you need to put fuel in your car. No way to cheat that!

    Beyond the simplicity of levying the gas tax, it is also a very elegant tax. If you drive a lighter, fuel efficient vehicle you pay less per mile. A heavier (casing more road damage), less efficient and often more polluting vehicles will pay more per mile. Why the hell you would want to undermine such an elegant system?!?!

    Electric vehicle however will need to pay a mileage fee as there is no other way to impose a road tax on them.

  • Benton

    MBUF would influence travel behavior at the margins more effectively than the gas tax currently does. A mileage based user fee DIRECTLY charges drivers for each additional mile driven. It tells drivers: “hey, you’re thinking about taking a trip? This is how much it will cost to use a car.” For various reasons, a gasoline tax doesn’t accomplish this quite as well.

  • Joe Linton

    I tend to agree – MBUF is better than gas tax for influencing drivers – and then I wonder why? Is it because gas (like the cost of the car) is a slightly sunken cost (as in “I already paid for the gas, I might as well use it.”) Somewhere I’ve read that drivers tend to think of costs on a per-trip basis, ignoring the cost of buying a car, registration, insurance, etc. In the driver’s brain is gas more like those sunken costs? or more like a per trip cost? Would MBUF really be any better – in terms of driver perception of per-trip cost? I hope so, but I am not sure.

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