In 1919, my home state of Oregon was the first to tax gasoline and dedicate the revenue to roads. Now Oregon is moving to become the first state to replace gas taxes with a per-mile fee.
Historically, gas taxes paid for most of our state highways, but there are four reasons why they no longer work. First, gas taxes don’t keep up with inflation. For example, the value of the dollar has fallen by a third since 1993, the last time the federal gas tax was increased.
Second, gas taxes don’t keep up with increasing fuel economy. The average car on the road today uses little more than half the gasoline of the average car in 1970, plus growing numbers of electric cars don’t use gasoline or diesel fuel at all.
Third, federal and state gas taxes have paid for state highways, but most cities and counties don’t collect fuel taxes and must pay for their roads and streets out of general funds. While there is no reason why some people should subsidize other peoples’ travel, an even more serious result is poorly maintained infrastructure as most of the crumbling bridges and roads we keep hearing about are locally owned, while state highways paid for out of user fees tend to be in much better shape.
Finally, gas taxes do nothing to mitigate one of the biggest problems in our cities: traffic congestion. While airlines, hotels and other businesses deal with fluctuations in demand by varying prices, auto drivers pay the same fuel tax whether they drive at rush hour or at midnight.
This problem is especially critical because highways are one of the few things whose supply declines when demand increases. A free-flowing freeway lane can move about 2,000 cars an hour. But if traffic slows due to congestion, flows can decline below 1,000 cars an hour. Such roads will remain congested for hours after traffic demand falls below 2,000 cars an hour.
By charging a variable fee depending on the amount of traffic, highway managers can insure that flows never decline. This has the curious result of effectively doubling the capacity of the road to move traffic, which is good news for commuters everywhere: Imagine cities with no congestion!
Increasing gas taxes would temporarily deal with the first problem, but not the others. As envisioned in Oregon, mileage-based user fees will help solve all of these problems by completely replacing gas taxes, so no one can complain that they are being double-taxed. Drivers may end up paying a little more than they pay today in order to relieve cities and counties from using general funds to pay for roads.
Some people have raised three objections to mileage-based fees. First, owners of electric or other fuel-efficient cars argue that they should get a discount because they are saving energy. But they already save money on the fuel they buy; why shouldn’t they pay their fair share to use the roads?
Second, many people worry about government monitoring their travel. Oregon’s solution is to use a system that tracks how much you owe, but does not record when or where you traveled. Thus, there is no way the system could be used to invade people’s privacy.
Finally, people worry that politicians will siphon away mileage-based revenues to spend on pet projects rather than roads. Many states have constitutional limits requiring that gas tax revenues be used only for highways, roads and streets; similar limits could be placed on mileage-based fees.
Oregon’s experiment will start with 5,000 drivers who will pay a mileage fee instead of the gas tax. If it works, the number will be expanded until everyone in the state uses this system.
In the long run, this will give highway managers incentives to keep you happy by providing sound transportation facilities. You deserve to drive on smooth, safe, uncongested roads, and mileage-based user fees will make it possible for that to happen.
Randal O’Toole is an Oregon native, a senior fellow with the Cato Institute and author of “Ending Congestion by Refinancing Highways.” Send comments to firstname.lastname@example.org.