Moving to a VMT Tax

[SP Cook]

People are making way too much of this.  If you enforce the registration laws that currently exist (you have to register your car where you actually live) and just pay the per mile tax to your state, it all will come out close enough to even to not matter.  For every vacationer in Florida paying Ohio, there is a snowbird driving around the country, but paying Florida.  Not worth the cost of making it more complicated.

Just do it as a part of the inspection sticker process, if the state has one, or otherwise just have people get checked at the state police, or the county clerk, or the sheriff, or whatever the state want to use for that, and pay the bill. 

[SEWIGuy]

Big brother already knows where most of us are and what we are doing.

[vdeane]

A VMT tax would very directly and explicitly spell out how the amount paid correlates to mileage, and shove it in people's faces.  Paying gas is something I hardly even think about.  A VMT tax would force me to think about such things and actively notice how many miles I drive in a certain period of time.

Why would VMT cause you to notice more how far you drove, as opposed to the gas gage going down as you drive?

Still, I think the better option would be to somehow add a tax to the electric charging station. This can be done relatively easily at a public charging station - no different taxing per kilowatt-hour than taxing per gallon at a gas station. The home chargers could raise separate issues. But as I understand it many utility companies have separate ways of metering vehicle charging, just like they do for your home a/c. Taxes could be added via that metering.

Gas: I'm far enough from living paycheck to paycheck that I really don't notice the price of gas all that much.  Plus I'm rational enough to realize that the amount most people obsess over it is way overblown.  Even a difference of a dollar a gallon is only $15 different for a whole tank, and I usually fill somewhere around half (+/-  ~10%).  More normal differences of 10 or 20 cents don't even get noticed in the total cost.  As for noticing the gas gauge going down, yeah, sure, but my car is fuel efficient enough and my commute short enough that it's rare for me to get gas unless it's preparing for, during, or returning from a roadtrip.  Can count on the fingers on one had annually rare.  I tend to look at how much I paid for curiosity's sake and then forget about it.

VMT Tax: This would likely involve checking the odometer, calculating the tax based on my vehicle class, and then mailing it in with a check.  For both federal and state.  And then archiving the paperwork for however many years in case of audit, just like is done with income taxes.  Yeah, I think that's fairly noticeable.

I like the idea of charging electricity for EVs.  For home charging, why not just tax the total bill?  The US is in dire need of modernizing and hardening its electric grid, so if we make a program for that and split the revenue between that and the highway fund, it should work.

If it wasn't political suicide, I would support increasing the gas tax 75¢, some state and some federal. This is a tripling of revenue, encourages more fuel-efficient vehicles rather than discouraging them, and only increases per-mile cost from 59¢ to 62¢ (that number includes maintenance and the cost of the car itself through depreciation as well as existing gas prices).

Agreed.  That would take care of everything except pure EVs (and the few hydrogen cars on the road, but charging hydrogen should be just as easy as gas).  I think it's weird that this is politically harder than adding a whole new tax that will be much more visible and bureaucratic, with potential big brother implications.

People are making way too much of this.  If you enforce the registration laws that currently exist (you have to register your car where you actually live) and just pay the per mile tax to your state, it all will come out close enough to even to not matter.  For every vacationer in Florida paying Ohio, there is a snowbird driving around the country, but paying Florida.  Not worth the cost of making it more complicated.

Just do it as a part of the inspection sticker process, if the state has one, or otherwise just have people get checked at the state police, or the county clerk, or the sheriff, or whatever the state want to use for that, and pay the bill. 

What about pass-through states that are nonetheless large enough the people are likely stopping for gas?  They won't get anything if we just do it with registration to one's home state.

[J N Winkler]

You also should think tax evasion. It's almost impossible to avoid per-gallon tax.

Since fuel tax is generally collected at the terminal, the cost of enforcement is very low--less than 1% of revenues.

Per-mile odometer based fee makes odometer tampering attractive. Not that it's an unusual thing already - just to increase resale value of a car.

Odometers are not reliable to begin with.  There are many, many cars still on the road with ones that simply don't turn--no tampering involved--because so many automakers in the 1990's went to plastic gears with a lubricant that slowly dissolved them over time.  There are specialty businesses that make replacement gears (typically sold online), but it's rarely worth one's while to dismantle the instrument panel just to get access to the odometer assembly.

[mgk920]

Several years ago I already pretty much abandoned the idea of taxing vehicle use based of distance driven or energy used to fund road works and instead figured that the simplest and best way is to eliminate all of those taxation schemes and put transport infrastructure on the general fund.  Justification?  We ALL pay taxes based on our own personal levels of economic activity, and that level of activity very closely correlates to the amount of utility that each one of us derives, both directly and indirectly, from the transport system.  K.I.S.S.

Mike

[SectorZ]

Several years ago I already pretty much abandoned the idea of taxing vehicle use based of distance driven or energy used to fund road works and instead figured that the simplest and best way is to eliminate all of those taxation schemes and put transport infrastructure on the general fund.  Justification?  We ALL pay taxes based on our own personal levels of economic activity, and that level of activity very closely correlates to the amount of utility that each one of us derives, both directly and indirectly, from the transport system.  K.I.S.S.

Mike

Been arguing this point for years. Unless you're a hermit that grows/kills your own food and makes everything you need at home, everyone benefits from the system of roads we have.

[kalvado]

Several years ago I already pretty much abandoned the idea of taxing vehicle use based of distance driven or energy used to fund road works and instead figured that the simplest and best way is to eliminate all of those taxation schemes and put transport infrastructure on the general fund.  Justification?  We ALL pay taxes based on our own personal levels of economic activity, and that level of activity very closely correlates to the amount of utility that each one of us derives, both directly and indirectly, from the transport system.  K.I.S.S.

Mike

(putting my fake urbanist hat on) And once again those suburban people want to profit over the inner city folks to fund their car addiction. We need to reduce reliance on cars, etc, etc, and of course our taxes from general fund shouldn't be used that way!

[kphoger]

People are making way too much of this.  If you enforce the registration laws that currently exist (you have to register your car where you actually live) and just pay the per mile tax to your state, it all will come out close enough to even to not matter.  For every vacationer in Florida paying Ohio, there is a snowbird driving around the country, but paying Florida.

On a smaller scale, it doesn't always work out.  For every commuter who lives in Moorhead but does 85% of his driving in North Dakota, there isn't necessarily a commuter who lives in Fargo but does 85% of his driving in Minnesota.  Likewise, Grand Forks.

[index]

"I have the funniest story, mister tax man. You won't believe it, but my odometer started magically rolling backwards when I was driving the other day! It was the craziest thing. I actually have less miles now, so I think it's you who owes me money."

[kphoger]

"I have the funniest story, mister tax man. You won't believe it, but my odometer started magically rolling backwards when I was driving the other day! It was the craziest thing. I actually have less miles now, so I think it's you who owes me money."

↓  IYKYK  ↓

[1995hoo]

I can't help but wonder whether the government would immediately cast suspicion upon anyone who drives considerably less than the average. I telecommute almost every day; I might be in the actual office for a total of two to three weeks all year, and when I am in the office, I take the train to get there. I haven't driven my TL even 2000 miles in a single calendar year in 2020, 2021, or 2022. I used to drive considerably more back before I started telecommuting and before my wife got her TLX–once she got that car, it became our primary roadtrip car and my miles driven dropped off precipitously.

[HighwayStar]

I can't help but wonder whether the government would immediately cast suspicion upon anyone who drives considerably less than the average. I telecommute almost every day; I might be in the actual office for a total of two to three weeks all year, and when I am in the office, I take the train to get there. I haven't driven my TL even 2000 miles in a single calendar year in 2020, 2021, or 2022. I used to drive considerably more back before I started telecommuting and before my wife got her TLX–once she got that car, it became our primary roadtrip car and my miles driven dropped off precipitously.

Before COVID probabally but now that work from home has been normalized in so many contexts it would be difficult to make that case.

[HighwayStar]

I am opposed to the VMT, its a Rube Goldberg fix to a simple issue.

First, roads are so fundamental to the nation as a whole that there is a good case for just funding them out of a broad national tax, be it on income or better yet imports. Everyone ends up paying in, which since we all benefit from the roads, even those who don't drive, would be reasonably equitable. Such a tax can be very cheap to administer compared to setting up a whole system for VMT.

Second, if we for some reason want to tax people on a use basis, which I'm unconvinced is worth bothering to do, we can either tax registration or driver licensing. Both are complex compared to a broad national tax, but simple compared to VMT.

Finally, while my inner economist does love the beauty of well functioning markets for aligning supply with demand, I honestly think roads come fairly close to being a public good. Not as perfect an example as national defense or law enforcement, but for many purposes quite close. Although possible, it is extremely expensive and difficult to truly restrict road use to paying users, which makes them pretty close to non-exculdable. Sure, toll roads do it, but most roads cannot be toll roads, and every toll road would be more efficient without needing that overhead. And while roads are definitely rival in a strict sense, the fact that any given driver can only consume 1 vehicle worth of capacity means that the marginal consumption of individual actors is always going to be low. And when people "over consume" it is actually straightforward for a benevolent dictator to put resources to their highest use based on congestion. For roads, a single point of national funding (and probabally corresponding local funding for streets) is in its own way a beautifully simple approach.

[MikeTheActuary]

I am opposed to the VMT, its a Rube Goldberg fix to a simple issue.Everyone ends up paying in, which since we all benefit from the roads, even those who don't drive, would be reasonably equitable.

Under a user-fee based system, be it VMT, or be it some other mechanism, you still have people paying in proportion to their second-hand or third-hand use, due to the incremental transportation costs built into the goods and services they consume.

A hermit who never leaves their property and is able to subsist with just the food and water they can obtain from their property is never asked to pay for roads they derive minimal benefit for.

[HighwayStar]

I am opposed to the VMT, its a Rube Goldberg fix to a simple issue.Everyone ends up paying in, which since we all benefit from the roads, even those who don't drive, would be reasonably equitable.

Under a user-fee based system, be it VMT, or be it some other mechanism, you still have people paying in proportion to their second-hand or third-hand use, due to the incremental transportation costs built into the goods and services they consume.

A hermit who never leaves their property and is able to subsist with just the food and water they can obtain from their property is never asked to pay for roads they derive minimal benefit for.

Incorrect. For the consumer to pay the full value of those taxes the good or service would have to have perfectly inelastic demand, which is unrealistic. The consumer's tax burden is a function of elasticity of demand.
Furthermore, there is good reason to believe that roads create synergies and positive externalities which are not captured in direct user fees. Total surplus is maximized in cases of positive externalities by various interventions that shift some of the cost to those who would not pay otherwise.
Finally, even if VMT or other such mechanisms do manage to capture that, they are still a far more costly and complex way of doing so versus a whole economy payment mechanism.

Such hermits are exceptionally rare in the US today, and such a marginal case that they should not dictate tax policy for the 99.99999999% of the rest of the country. Further, if the tax is on something like imported goods its highly unlikely they will pay anyway since they would not be buying them. Also highly doubtful that such people pay income taxes.

[MikeTheActuary]

For the consumer to pay the full value of those taxes the good or service would have to have perfectly inelastic demand, which is unrealistic.

If the demand for the good or service is inelastic, and the apparent price rises because of the application of the cost of maintaining the transportation system, then less of the product will be demanded resulting in less demand for or wear-and-tear on the transportation system...and it will balance out.

More realistically, what would happen is that the distribution of the entire supply chain would evolve.  Modes of transportation that aren't tax-subsidized would be used more because they would seem more competitively-priced.   To the extent that certain products rely on cheap tax-subsidized distribution networks to facilitate their business model, there would be an evolution which, incidentally, might address the weaknesses currently observed where a single failure along the supply/distribution path can cause massive (and expensive) disruption.

The more that a good or service can directly reflect all of the costs associated with it, the more likely rational decision-making will occur in decisions on how to provide that good or service, or even whether that good or service can be consumed.

[kalvado]

For the consumer to pay the full value of those taxes the good or service would have to have perfectly inelastic demand, which is unrealistic.

If the demand for the good or service is inelastic, and the apparent price rises because of the application of the cost of maintaining the transportation system, then less of the product will be demanded resulting in less demand for or wear-and-tear on the transportation system...and it will balance out.

More realistically, what would happen is that the distribution of the entire supply chain would evolve.  Modes of transportation that aren't tax-subsidized would be used more because they would seem more competitively-priced.   To the extent that certain products rely on cheap tax-subsidized distribution networks to facilitate their business model, there would be an evolution which, incidentally, might address the weaknesses currently observed where a single failure along the supply/distribution path can cause massive (and expensive) disruption.

The more that a good or service can directly reflect all of the costs associated with it, the more likely rational decision-making will occur in decisions on how to provide that good or service, or even whether that good or service can be consumed.

Did that happen with higher gas prices?  I don't think so.

[Joe The Dragon]

As electric cars proliferate, gasoline tax receipts will fall, causing the source of most funding for road maintenance and construction to dry up. The obvious solution is a fee levied on miles driven. Here's how I envision such a system working

For simplicity, all states should operate on one system, probably to be operated by EZPass

One compromise to economic efficiency would be registering if you drive in a different state. People who live in Connecticut and work in New York should pay for the upkeep of the roads in New York that they drive on. As you drive down the Merritt Parkway, the system will charge you a fee to be given to ConnDOT, but once you cross over into New York, GPS will register that and switch over to billing you on behalf of NYSDOT. Your bill, given at the end of each month, will break down which states you drove in and how much you owe.

Those are my thoughts. Does anyone else have any?

need to ban rent a car places form changing any admin fees for this new tolling system

[hotdogPi]

Did that happen with higher gas prices?  I don't think so.

From what I understand, people adjusted to the 2011-2014 gas price spike (and possibly 2008 except that spike was so short) by purchasing more fuel efficient vehicles. I don't know whether miles driven decreased or not.

[skluth]

People are making way too much of this.  If you enforce the registration laws that currently exist (you have to register your car where you actually live) and just pay the per mile tax to your state, it all will come out close enough to even to not matter.  For every vacationer in Florida paying Ohio, there is a snowbird driving around the country, but paying Florida.

On a smaller scale, it doesn't always work out.  For every commuter who lives in Moorhead but does 85% of his driving in North Dakota, there isn't necessarily a commuter who lives in Fargo but does 85% of his driving in Minnesota.  Likewise, Grand Forks.

It's true that many commuters live in Moorhead and work in Fargo; one of my best friends does. That doesn't mean he does 85% of his driving in North Dakota. I bet there are a lot more folks who live in Fargo that drive to Minneapolis on occasion and even many who do so frequently, certainly more than Moorhead residents who visit Bismarck. And while those trips are not as frequent, those trips are about a 500 mile round trip and almost entirely in Minnesota. There are also probably more North Dakotans who vacation in Minnesota's lake country than Minnesotans do in North Dakota. It does balance out even if it doesn't in your immediate sphere of people.

[kalvado]

Did that happen with higher gas prices?  I don't think so.

From what I understand, people adjusted to the 2011-2014 gas price spike (and possibly 2008 except that spike was so short) by purchasing more fuel efficient vehicles. I don't know whether miles driven decreased or not.

There was a 2% dip in 2009 and a few years of no growth. Nothing proportional to gas price
And efficiency was a government mandated thing rather than consumer choice (same as airbags and catalytic converters). If that would be by choice, there will be many more civics on the road.

[MikeTheActuary]

For the consumer to pay the full value of those taxes the good or service would have to have perfectly inelastic demand, which is unrealistic.

If the demand for the good or service is inelastic, and the apparent price rises because of the application of the cost of maintaining the transportation system, then less of the product will be demanded resulting in less demand for or wear-and-tear on the transportation system...and it will balance out.

More realistically, what would happen is that the distribution of the entire supply chain would evolve.  Modes of transportation that aren't tax-subsidized would be used more because they would seem more competitively-priced.   To the extent that certain products rely on cheap tax-subsidized distribution networks to facilitate their business model, there would be an evolution which, incidentally, might address the weaknesses currently observed where a single failure along the supply/distribution path can cause massive (and expensive) disruption.

The more that a good or service can directly reflect all of the costs associated with it, the more likely rational decision-making will occur in decisions on how to provide that good or service, or even whether that good or service can be consumed.

Did that happen with higher gas prices?  I don't think so.

It has happened with fuel prices when looking over the long term, usually in ways that are not immediately apparent from the consumer's point of view, and/or in ways that are difficult to discern given the impacts of other changes over the same span of time.

(Part of my job involves modeling global cargo patterns, since my employer writes cargo insurance coverage.)

[J N Winkler]

What MikeTheActuary says about full internalization of costs supporting rational decision-making comes from standard economic theory and is not, in my view, contradicted by what happened with gas guzzlers during the late noughties/early 2010's price spike.  Yes, there were many anecdotes of people trading in such vehicles for more fuel-efficient ones.  But that is not the same as it happening on a large scale, and it is questionable that such trade-ins make dollars-and-cents sense except in certain marginal cases, since initial purchase price and depreciation for new cars is so much larger than the extra amount paid in fuel each year when the per-gallon cost goes up.

Think of it this way:  if you drive 10,000 miles annually and can choose between two vehicles, one a SUV getting 15 MPG and the other a compact car getting 25 MPG, then you are choosing between annual fuel costs of $1333 and $800 (difference of $533) when gas costs $2 per gallon, versus $2666 and $1600 (difference of $1066) at $4 per gallon.  This is dwarfed by a typical cost difference of at least $20,000 in purchase price new ($25,000 for a compact car versus $50,000 for a SUV).

Trading in a SUV for a compact does have appeal for families living paycheck to paycheck who are not able to absorb an additional ~$100 per month in expenses when gas prices go up.  However, I would contend that such people cannot afford the SUV to begin with and thus are living beyond their means.

[HighwayStar]

For the consumer to pay the full value of those taxes the good or service would have to have perfectly inelastic demand, which is unrealistic.

If the demand for the good or service is inelastic, and the apparent price rises because of the application of the cost of maintaining the transportation system, then less of the product will be demanded resulting in less demand for or wear-and-tear on the transportation system...and it will balance out.

More realistically, what would happen is that the distribution of the entire supply chain would evolve.  Modes of transportation that aren't tax-subsidized would be used more because they would seem more competitively-priced.   To the extent that certain products rely on cheap tax-subsidized distribution networks to facilitate their business model, there would be an evolution which, incidentally, might address the weaknesses currently observed where a single failure along the supply/distribution path can cause massive (and expensive) disruption.

The more that a good or service can directly reflect all of the costs associated with it, the more likely rational decision-making will occur in decisions on how to provide that good or service, or even whether that good or service can be consumed.

Now you are moving the goalposts. And you are completely screwing up how economics works.

"If the demand for the good or service is inelastic" Fine, lets assume that for now.

"and the apparent price rises because of the application of the cost of maintaining the transportation system" not sure what "apparent" price is supposed to mean here, but lets assume its cost the consumer sees as that seems to be what you meant.

"then less of the product will be demanded resulting in less demand for or wear-and-tear on the transportation system...and it will balance out"

And....reductio ad absurdum. If demand is perfectly inelastic (required for the full tax burden to be borne by the consumer) than a rise in price produces no change in demand because that is by definition what perfectly inelastic means.

"The more that a good or service can directly reflect all of the costs associated with it, the more likely rational decision-making will occur in decisions on how to provide that good or service, or even whether that good or service can be consumed."

This is fairly close to what I would agree with, but you are missing several key elements. Let me state this the correct way

Ideally, the cost of providing a good or service is borne by those actors who obtain utility from it in direct relation to the utility received.

Unlike your expression, this one makes explicit that cost should be attached to utility. This is a key distinction, because roads have significant positive externalities which are not priced to the users, and thus roads will be under provisioned unless funded by those 3rd parties that benefit from the externalities. This is a classic feature of any good or service with positive externalities, of which education has been used as a typical example for many years.

The key to all of this is charging the end user only under provisions roads. Separately from this, I am arguing that a general tax, by its efficiency and taking care of the positive externalities problem, is the better solution for funding roads. Yes it theoretically disconnects users from direct costs, but for roads this is not a significant issue because the entire population uses them.

[MikeTheActuary]

Now you are moving the goalposts. And you are completely screwing up how economics works.

That's why I shouldn't post in the morning before I'm fully caffeinated, or when I'm multitasking. 

Unlike your expression, this one makes explicit that cost should be attached to utility. This is a key distinction, because roads have significant positive externalities which are not priced to the users, and thus roads will be under provisioned unless funded by those 3rd parties that benefit from the externalities. This is a classic feature of any good or service with positive externalities, of which education has been used as a typical example for many years.

The key to all of this is charging the end user only under provisions roads. Separately from this, I am arguing that a general tax, by its efficiency and taking care of the positive externalities problem, is the better solution for funding roads. Yes it theoretically disconnects users from direct costs, but for roads this is not a significant issue because the entire population uses them.

Where I was going with my thought was that with a VMT, the cost of the VMT will be passed along to the consumers of goods and services that rely on transport across the roads.  With the exception of my aforementioned (and admittedly improbable) hermit, everyone ends up paying in proportion to their use of the roads, be it direct or indirect....just as they do for the costs of railroads, or blue- or brown-water shipping, and just as they ought to for transport by air.

Now, where I can see some criticism for the concept is the concern that it would place additional demands on those on the lower rungs of society, who can least afford additional demands.  That is a valid concern for many things tax- and policy-related, one that ought to be addressed.  The fact that it needs to be addressed shouldn't be a reason to not seek better linkages between costs of public services and the users of those services.