Are We Ready for a New Kind of Gas Tax?

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On Public Policy Day at the D.C. Auto Show this year, we got wind of some dire news. The Federal Highway Trust Fund is slowly depleting because gas taxes have not been raised in 17 years.

While the federal gas tax has remained constant, the spending power of the 18 cents a gallon used for transportation improvements has decreased due to inflation.

While many business people support raising gas taxes, most also know it would be akin to political suicide. However, the country needs a serious transportation infrastructure facelift. Are we ready for a new kind of gas tax?

Reduced highway & transit funding, Jack Basso, AASHTO - 2010 DC Auto Show, Public Policy Day

Reduced highway & transit funding, Jack Basso, AASHTO - 2010 DC Auto Show, Public Policy Day

gas Prices

gas Prices

That was the question posed by Jack Basso of the American Association of State Highway and Transportation Officials. He noted that the U.S. is currently investing only about 40% of what the country should be spending on improvements to our transportation system.

To be able to accommodate the mobility demands of the public, he said, we would need a total $545 billion investment over the next five years. Worse, as cars meet higher gas-mileage standards, they will use less fuel and consequently, pay less in gasoline tax.

So, what's the solution? Basso suggested that one option would be a Vehicle Miles Traveled (VMT) tax. Long discussed in transportation policy circles, VMT taxes are now starting to appear in countries like the Netherlands.

Basso gave few specific details about how a VMT tax might be implemented in the U.S., but he noted a VMT tax has several long-term advantages over a standard gas tax.

FIrst, it avoids the gas-tax political impasse (though a VMT would undoubtedly spark its own political controversy). Second, it give the government a way to collect funds from vehicles that rely on energy sources other than gasoline (like plug-in vehicles).

Of course, many issues would need to be figured out for a VMT tax to be implemented. Will the tax be per vehicle, or per driver? How often will VMT be computed? How will it be verified? And, the most striking question of all, at what price will the VMT tax be set?

While many taxpayers might have hoped that using less petroleum would translate into lower taxes, a VMT tax would at least treat all vehicles--whether they use gasoline or not--equally.

Perhaps this is only fair, since miles driven is a better approximation of the wear and tear imposed by using roads than is the number of gallons of gasoline consumed.

It also begins to settle some early fears that the use of plug-in vehicles (such as the Nissan Leaf or Chevy Volt) may lead to less funding for highway improvements.

This policy conversation is just starting and I suspect that it will get heated fairly quickly. It also has me wondering about other alternatives for transportation funding.

Give us your thoughts and ideas in the Comments section, below.

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