How mileage-based fees should work

[hotdogPi]

Here would be a typical example of paying for mileage: I go to a company that does oil changes. I get my oil changed, and I hand in a slip of paper that says "25565". I pay $380.05 ($360.10 for 5¢/mi + $19.95 oil change). Then I get a new paper that says "32767", as that is the current reading of my odometer.

It will be possible to get the number updated without changing oil. However, oil changes require a number update. Additionally, the paper is designed so that it cannot easily be counterfeited.

[Pete from Boston]

What about those of us who change our own oil?

[corco]

Yeah, no. I don't trust jiffy lube to take over my tax assessment any more than i trust them to change my oil (which is to say i don't).

Honestly, Americans are notoriously honest about paying taxes. We talk about tax fraud in this country, but compared to most developed nations there is very little of it. I'd trust a monthly self reporting system, with the idea that if you ever sell your car or are in an accident, your odometer is recorded and if it turns out you've been lying, you're on the hook for the back taxes and a penalty.

Alternatively, eliminate driving taxes entirely and fund through income and property taxes. Don't know that I like that option, but it would be simpler.

[jeffandnicole]

You honestly think that anyone would remember to bring in a slip of paper with their odometer reading 6 months after their last oil change?  Hell, I would lose that thing the minute I walked out of the shop. 

And you would find the majority of people would instantly learn how to change their own oil, or pay a friend $20 to do it for them.

[kkt]

The mileage could be checked anytime the vehicle is serviced commercially.  Here, at least, every legit repair shop is required to record the odometer reading anyway.  If you don't do it when it's serviced, here at least an emissions inspection is required every two years and it could be done then.  Though I personally would rather not save up two years' worth of mileage to pay for at once.

[corco]

I think some aspect of self reporting would be necessary. It could be added to your W-4 form, actually. "I anticipate driving x miles this year," with that amount deducted from your paycheck. At tax time, you pay that amount or more if you owe more, and then you supplement with whatever enforcement mechanism, be it emissions tests or title actions.

[Pete from Boston]

I think some aspect of self reporting would be necessary. It could be added to your W-4 form, actually. "I anticipate driving x miles this year," with that amount deducted from your paycheck. At tax time, you pay that amount or more if you owe more, and then you supplement with whatever enforcement mechanism, be it emissions tests or title actions.

A lot of folks get 1099ed, no withholding and no W-4.

[corco]

And just like with the 1099, they would have to budget to pay in lump at the end of the year.

[kkt]

Hm. Road taxes are usually paid to the state, which does the maintenance.  Withholding taxes are generally for federal income tax, and some states don't even have a state income tax to withhold from paychecks. You'd have to establish some mechanism for the IRS to distribute those estimated mileage payments to the states and credit the right person.  Messy.

[jwolfer]

More bureaucracy.. The department of transportation funding

[Duke87]

How mileage based fees should work is that they should be added to the purchase price of a new car. Let's say the tax is 2 cents a mile, multiply by 150,000 miles design life of the car and... that's $3,000 you have to add to the sticker price. There. Done.

I would not support any road use tax that requires the individual driver to pay it directly, simply because this creates a massive amount of unnecessary administrative burden. Currently, governments only have to worry about collecting gas tax from gas stations, which are considerably fewer in number than individual drivers. In order to preserve this efficiency in collection, we need to keep the number of points of collection down.

My method shifts the points of collection from gas stations to car dealerships, but preserves the same basic idea that no individual ever has to actively pay the tax, only a certain type of business does and then they simply pass the cost on to the consumer. Compared to collecting from individuals this is less work to keep track of and easier to enforce.

[lordsutch]

It wouldn't be that hard to do an annual odometer check as part of the tag renewal process (much as many states have an annual vehicle inspection requirement now, and they often record the mileage anyway as part of that inspection), along with spot checks when vehicles are pulled over by law enforcement for other reasons.

As for the annual "sticker shock" factor, bear in mind that property owners pay real estate taxes every year on an annual basis, on the order of several thousands of dollars; the annual VMT tax would likely be on the order of $100-200. But even so it could be reduced with either a monthly payment plan, like how people pay for auto and home insurance, or escrow account tied to the auto lease/loan or insurance. On a lease, it could even be built into the lease price and credited back at the end of the year if you don't exhaust the mileage allowance. No matter the mechanism, you'd pay based on your anticipated mileage the upcoming year, and get a refund of the difference (or pay the shortfall) at the end.

Perhaps you could also get a partial credit for tolled mileage incurred to limit the double-whammy effect there.

[corco]

How mileage based fees should work is that they should be added to the purchase price of a new car. Let's say the tax is 2 cents a mile, multiply by 150,000 miles design life of the car and... that's $3,000 you have to add to the sticker price. There. Done.

Damn, I like that idea best. Since most people buying new cars finance anyway, that would be pretty fair. Their monthly payment would be a bit higher, but they'd save much of that in taxation. They'd be paying a little more up front, but whatever.

[1995hoo]

Hm. Road taxes are usually paid to the state, which does the maintenance.  Withholding taxes are generally for federal income tax, and some states don't even have a state income tax to withhold from paychecks. You'd have to establish some mechanism for the IRS to distribute those estimated mileage payments to the states and credit the right person.  Messy.

A further problem: How do you deal with vehicles driven into other states or countries? In any number of areas it's quite common to commute across state or territorial boundaries, for instance (New Jersey to New York being a good example of the former; Virginia to DC would be an example of the latter). Then you have travel, which ought to be something everyone on this forum can understand. Someone like Oscar has driven a lot in Canada with a US-plate vehicle.

So how do you account for the mileage driven in each jurisdiction? Realistically, you'd have to do so if the tax is to accomplish its intended purpose. Why should, for example, Virginia be compensated for 400 miles I might drive in South Carolina? The most obvious solution would be GPS tracking. I hope everyone here can easily understand how odious a concept that is. It'd be a short slope to the government using the tracking for whatever reason they like. "You're black. Why were you in that neighborhood at night?" "You live in subruban Virginia. You have no need to drive down Sheriff Road after midnight." "You're from New York. You should fly to Florida rather than drive."

I think I like Duke87's idea best. Just add something to the cost of the vehicle. It's still imperfect, of course. People cross state lines to buy cars all the time based on state tax rates.

[oscar]

As for the annual "sticker shock" factor, bear in mind that property owners pay real estate taxes every year on an annual basis, on the order of several thousands of dollars; the annual VMT tax would likely be on the order of $100-200. But even so it could be reduced with either a monthly payment plan, like how people pay for auto and home insurance, or escrow account tied to the auto lease/loan or insurance. On a lease, it could even be built into the lease price and credited back at the end of the year if you don't exhaust the mileage allowance. No matter the mechanism, you'd pay based on your anticipated mileage the upcoming year, and get a refund of the difference (or pay the shortfall) at the end.

Real property taxes are often paid through escrow accounts funded out of regular mortgage payments, at the insistence of the mortgage company. For people like me who've "burned the mortgage" and so don't pay into escrow, sticker shock can be an issue, though my county (which is pretty efficient about pulling cash out of our wallets) splits the annual payment into two semi-annual payments, and lets you opt into automatic payments out of your checking account, to make the process as painless as possible.

But until Virginia's personal property tax on autos was substantially reduced (by subsidizing county tax assessments with state general revenues), the "sticker shock" of annual personal property bills was a major factor behind the PPT's unpopularity. Promising to abolish the "car tax" (which was only partially accomplished, before the state ran low on money) helped elect an otherwise unappealing candidate for governor.

[1995hoo]

....

But until Virginia's personal property tax on autos was substantially reduced (by subsidizing county tax assessments with state general revenues), the "sticker shock" of annual personal property bills was a major factor behind the PPT's unpopularity. Promising to abolish the "car tax" (which was only partially accomplished, before the state ran low on money) helped elect an otherwise unappealing candidate for governor.

I never entirely understood the insistence on making that tax a single annual lump-sum payment instead of splitting it into installments. Part of why it was so universally hated was the obnoxious demand that it all be paid in a lump by October 5. If they'd split it into two or three payments so the amount didn't hit quite as hard, there'd have been less hatred. Not that people would have suddenly liked it, of course, but paying $333 three times a year annoys most people less than $1000 in a lump sum.

(My feeling: If I have to pay a tax, at least that one is deductible on my federal return.)

[vdeane]

I'm against anything that would require me to guess how much mileage I will drive in a year.  That basically takes the most unappealing feature of a lease and shoves it down everyone's throat.  I also don't like the idea of having to make a large lump sum or have my car tracked by GPS (and, let's be realistic, the latter is probably a major reason why a mileage tax is so supported these days; law enforcement would LOVE it).

[Pete from Boston]

I'm against anything that would require me to guess how much mileage I will drive in a year.  That basically takes the most unappealing feature of a lease and shoves it down everyone's throat.  I also don't like the idea of having to make a large lump sum or have my car tracked by GPS (and, let's be realistic, the latter is probably a major reason why a mileage tax is so supported these days; law enforcement would LOVE it).

It's so supported because gas tax is a failed model that no longer correlates to miles traveled. 

[kkt]

I'm against anything that would require me to guess how much mileage I will drive in a year.  That basically takes the most unappealing feature of a lease and shoves it down everyone's throat.  I also don't like the idea of having to make a large lump sum or have my car tracked by GPS (and, let's be realistic, the latter is probably a major reason why a mileage tax is so supported these days; law enforcement would LOVE it).

It's so supported because gas tax is a failed model that no longer correlates to miles traveled. 

However it does a pretty good job of correlating with wear on the roads and on the planet, especially considering it costs almost nothing to administer.

[corco]

I'm against anything that would require me to guess how much mileage I will drive in a year.  That basically takes the most unappealing feature of a lease and shoves it down everyone's throat.  I also don't like the idea of having to make a large lump sum or have my car tracked by GPS (and, let's be realistic, the latter is probably a major reason why a mileage tax is so supported these days; law enforcement would LOVE it).

It's so supported because gas tax is a failed model that no longer correlates to miles traveled. 

However it does a pretty good job of correlating with wear on the roads and on the planet, especially considering it costs almost nothing to administer.

The problem is that it doesn't anymore, with vehicles becoming more and more fuel efficient or not using fossil fuel at all.

[kkt]

The more fuel efficient vehicles are generally lighter than average cars as well, so they put less wear on the roads.  Using less fuel is also better for carbon footprint, and if the vehicle is a plug-in in an area where the electricity is generated from non-fossil-fuel sources, the carbon footprint during operation is almost zero.  There's nothing wrong with rewarding that in the tax code.

[corco]

The more fuel efficient vehicles are generally lighter than average cars as well, so they put less wear on the roads.  Using less fuel is also better for carbon footprint, and if the vehicle is a plug-in in an area where the electricity is generated from non-fossil-fuel sources, the carbon footprint during operation is almost zero.  There's nothing wrong with rewarding that in the tax code.

In the short run, no, no problem with rewarding folks who save fuel. In the long run, this becomes a problem, because  more and more people are buying vehicles that use no fuel, and roads still have to be paid for. While heavy trucks cause road damage, a high quantity of cars requires the construction of massive infrastructure - so congestion is also really expensive, even if it does not pollute. That's why it's imperative that we begin to explore what the best options are for road user fees away from the fuel tax.

Right now we can sort of give people a pass in the name of environmental benefit, but as more and more people drive highly fuel efficient vehicles, that won't become something that continues to be viable. Some would argue we're already past that point. "Let people who drive fuel-free cars drive for free" is just not a viable long term solution if we still want to have money to maintain roads.

The notion that electric cars are "lighter" is patently incorrect, BTW - a Chevy Volt, for instance, weighs 3,543 lbs, while a Chevy Cruze in heaviest specification weights 3,471 lbs. The Volt and Cruze are nearly identical in size.

The Nissan LEAF weighs 3,391 lbs, while the similarly sized (albeit slightly smaller) Note weighs 2,523 lbs.

A Prius weighs 3,080 lbs, while a Corolla weighs 2,875 lbs.

Batteries are really heavy.

[kkt]

In the short run, no, no problem with rewarding folks who save fuel. In the long run, this becomes a problem, because  more and more people are buying vehicles that use no fuel, and roads still have to be paid for. While heavy trucks cause road damage, a high quantity of cars requires the construction of massive infrastructure - so congestion is also really expensive, even if it does not pollute. That's why it's imperative that we begin to explore what the best options are for road user fees away from the fuel tax.

Right now we can sort of give people a pass in the name of environmental benefit, but as more and more people drive highly fuel efficient vehicles, that won't become something that continues to be viable. Some would argue we're already past that point. "Let people who drive fuel-free cars drive for free" is just not a viable long term solution if we still want to have money to maintain roads.

Eventually something will have to be done.  But at the moment, sales of plug-in electrics is considerably less than 1% of all new car sales, and the lower the price of gas, the lower sales of electrics gets.

The notion that electric cars are "lighter" is patently incorrect, BTW - a Chevy Volt, for instance, weighs 3,543 lbs, while a Chevy Cruze in heaviest specification weights 3,471 lbs. The Volt and Cruze are nearly identical in size.

The Nissan LEAF weighs 3,391 lbs, while the similarly sized (albeit slightly smaller) Note weighs 2,523 lbs.

A Prius weighs 3,080 lbs, while a Corolla weighs 2,875 lbs.

Batteries are really heavy.

Point taken.  However, car companies pick light models to redesign as electrics.  Compared to cars in general, they're still pretty light.

[Rothman]

Duke's idea is intriguing, indeed, but I'd only accept it if gas taxes were done away with at the same time.

[Pete from Boston]

The more fuel efficient vehicles are generally lighter than average cars as well, so they put less wear on the roads.  Using less fuel is also better for carbon footprint, and if the vehicle is a plug-in in an area where the electricity is generated from non-fossil-fuel sources, the carbon footprint during operation is almost zero.  There's nothing wrong with rewarding that in the tax code.

The problem is, you are taking monies that exist for one purpose–maintaining the roads–and allocating them to an entirely different purpose, rewarding people for making environmentally friendly choices.  That may be a noble gesture, but there is no reason that reward should be paid for with our limited transportation maintenance funds.

Moreover, as more people switch away from gas vehicles, the share of maintenance costs that they alone bear will go up steeply, until gasoline vehicle ownership is completely disincentivized and there's nobody left to pay at all.  And then you're back at square one, except now you have the expectation that clean vehicle drivers are owed some money for being good to the planet.