Mileage tax to be watched closely in Oregon

There is interest in replacing the gas tax with a levy on the number of miles driven, but how will it work?

STATELINE.ORGAugust 3, 2013 

Two years from now, thousands of Oregon drivers could get a taste of what the future might hold for everyone: They will pay taxes not on the amount of gasoline their cars use, but on how far they go.

The move to a “miles traveled” tax, if it happens, is still a long way off in most corners of the country. But that is why transportation experts and elected leaders are so interested in seeing whether Oregon can make it happen.

“Per-mile charges are the most high-profile and discussed possible alternative to the gas tax,” said Jaime Rall, a transportation policy specialist at the National Conference of State Legislatures. “There’s no question about it: States want to know if this is going to be a viable way to fund transportation into the future.”

States are looking for an alternative because the per-gallon taxes often do not keep up with inflation, and they are bringing in less money as vehicles become more fuel-efficient.

Oregon hopes its new program using 5,000 volunteer drivers will show the public, not to mention hesitant lawmakers, that this alternative is easy and fair. And officials want to prove it can be done without Big Brother-type tracking devices.

Whether taxing miles instead of fuel is a good idea in theory is up for debate. The Oregon project could answer questions about whether it is a good idea in practice.

Seventeen other states, including Idaho, have also tested the idea. Most of those studies focused on technical concerns, such as what technology to use to track miles and how to ensure accurate billing, and participants’ attitudes toward the mileage tracking systems.

But no other state legislature has taken the next step of addressing how much money to charge per mile, or who should have to pay a mileage tax instead of the gas tax. The Oregon legislation addresses those questions, and unlike previous pilot projects, the new program is permanent.

Here are answers to some basic questions about the Oregon program, which lawmakers approved in early July. The bill now awaits a signature from Gov. John Kitzhaber, a Democrat.

Kitzhaber spokesman Ian Greenfield said the governor supported the bill throughout the legislative session. If the bill clears legal review, Kitzhaber would likely sign it before his Aug. 19 deadline for approving measures.

Q: How will it work?

A: The new program would start in 2015 using volunteers. Drivers would choose one of several options to keep track of the miles they drive. All of the options would be provided by private companies.

The choices fall into two broad categories. Basic mileage meters would keep count of miles driven using a car’s odometer. More advanced meters would use GPS technology to keep track of how far and where cars travel to make sure drivers are not charged for out-of-state or off-road trips.

Eventually, Oregon officials hope that a smartphone application can be developed to supplement the basic meters. Drivers would be able to turn on the expanded service software while they drive in other states or on private roadways to automatically report those mileage exceptions to the state.

The mileage meters would also be linked to cars’ fuel gauges to measure and report how much gas motorists use.

Meanwhile, the volunteers would still pay gas taxes at the pump. The state would compute how much money drivers paid in gas taxes and subtract that from the amount they owe in mileage taxes. The state would then send a bill for the difference.

Q: How much more or less would drivers pay?

A: Drivers with gas guzzlers would do well under the new program. Oregon’s gas tax is currently 30 cents a gallon. The mileage tax under the legislation would be 1.5 cents a gallon. So anyone driving a car averaging fewer than 20 miles per gallon would pay less money under the mileage tax than the gas tax, and perhaps even get a refund.

The average fuel efficiency for small vehicles in 2010, according to the U.S. Department of Transportation, was 23.5 miles per gallon. The Obama administration last year set efficiency goals for 54.5 mpg by model year 2025.

Q: What about people with new cars and electric cars?

A: James Whitty, who helped develop the program for the Oregon Department of Transportation, acknowledged that it would be a tough sell to get people with super-efficient vehicles to volunteer for the 2015 launch. But he stressed that the legislation passed less than a month ago, and the department has two years to figure out how to encourage drivers of efficient cars to take part.

That’s important because the program allows only 3,000 of the 5,000 slots to go to cars that get 22 mpg or less. The remaining spots are for more efficient vehicles.

Q: What about privacy?

A: Oregon tried a pilot project between 2006 and 2007 that used state-issued transponders to count miles. What the state found, Whitty said, was that the arrangement was expensive and that the public did not like having a GPS tracking device installed in cars.

That is why Oregon turned to private companies during a follow-up pilot program last year, which it conducted with Nevada and Washington state. Mile meters are already on the market for tracking trucks or for allowing insurance companies to charge customers based on the distances they drive.

This year’s legislation limits who can see the information reported by the meters, and it requires the state and private entities to destroy location information from participating drivers within 30 days of using it for billing.

Q: What other options do states have for taxing highly efficient vehicles?

A: At least 27 states tax alternative fuels used in vehicles, such as natural gas, electricity or ethanol, according to the National Conference of State Legislatures.

Virginia this year became the 10th state to impose a fee on owners of alternative fuel vehicles. Virginia’s new fee also applies to hybrids.

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