Replacing the gas tax with distance-based charging

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In the future, you may receive a bill that shows you a map of where you drove and how much you owe. The map above shows an actual, circuitous route I took from Avondale to the Loop, and was generated by a GPS device I carry. 

This is part two of two about a seminar in October about infrastructure funding and financing held by the Metropolitan Planning Council at their office at 140 S Dearborn. The first article talked about innovative ways to fund construction of highways, airports, transit, and other capital-intensive projects. The final speaker, Dr. Paul Hanley from the University of Iowa, talked about charging drivers based not on how much gas they use, but the distance they drive. This is known under several names but here I’ll be using “mileage charge” (see note 1).

A mileage charge can make up for the loss of gas tax revenues that’s happening because of an improvement in cars’ fuel efficiency, and that Americans as a whole are driving less. It would also charge those who drive electric cars; the current gas tax system, in essence, has those who drive the least efficient automobiles pay more for 100 miles of driving on roads than those with the most efficient automobiles. Each jurisdiction you drive through could have a different charge, similar to how each state, county, and city can charge a different rate for gas taxes (see note 2).

A mileage charge requires the use of GPS and a cell modem (a cellphone that can’t make phone calls). Hanley was the co-investigator in a study to determine if a mileage charge system is technologically feasible, and determine the public’s acceptance of a mileage charge.

Is it technologically feasible

Yes. There’s a device that connects with the OBD-II interface in all cars built since the mid-1990s. This allows the device to connect to the odometer and fuel gauge, needed for analysis and tracking mileage if the GPS cannot get a signal. A cell modem uploads information to a processing center for billing.

2,511 car drivers completed the study (see note 3). They drove in all 48 contiguous states for eight months for 21,566,000 miles. Hanley mentioned that the GPS could not record the location for 1,626,000 of these miles, but were able to interpolate most of this missing data. He called the system 99.4% accurate.

Is it acceptable

“We know that privacy is going to be a big issue”. Hanley gave some statistics about participants’ sentiments on the study and its focus:

• Initially, 42% were in favor of mileage charging. 17% were not in favor.
• After a 10 month exposure to the program, 70% were in favor of mileage charging. 19% were not in favor. Hanley ascribed the small increase of people not in favor partially to the fact that 25% of participants had device installation problems and a technician had to make a repeat visit.
• 60% of participants believe the government will track them.
• 66% of participants want the ability to audit the bill.

In a different question, Hanley asked respondents if they were in favor of mileage charging (hypothetically, regardless of the method to track it). 1,589 responded with 68% saying no, they were not in favor. If mileage charging was tied to fuel efficiency (those with higher efficiency cars would pay less per mile; it would be tracked by the car’s odometer), the number not in favor decreased to 45%. If a mileage charge used GPS, then the number of people not in favor increased to 74%.

Someone in the audience asked there was an alternative to GPS for jurisdiction-based mileage charging. Hanley replied that electronic toll gantries could be used in urban areas (toll gantries are the overhead structure on tollways that read the toll transponder on a car windshield); these are used in Singapore.

Another attendee asked about more local funding sources, and suggested using business improvement districts (known as Special Service Areas, SSA, in Chicago), traffic fines dedicated to safety programs, or a carbon tax, to fund infrastructure improvements.

The gas tax’s connection to sustainable transportation

The relationship between gas tax and sustainable transportation is easy to understand: A majority of funding for transit and non-motorized transportation projects is paid for by gas taxes. This holds true across the country, although the percentage paid for by gas taxes and the portion paid for by “general fund” revenue (like vehicle stickers, license & registration fees, and sales & property taxes) is different in each jurisdiction, including at the federal level. (At the federal level, money from the “general fund” is transferred to the Highway Trust Fund and Mass Transit Account.)

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The Chicago Transit Authority, and other transit agencies, purchase new equipment from programs mostly funded by gas tax revenue. Because of decreased driving and increased automobile fuel efficiency, revenues are down for highway maintenance, transit, and safety programs; the CTA has used grants to buy hybrid and electric buses. Photo by Kevin Zolkiewicz. 

Read more about our coverage of these programs: Highway Trust Fund (which includes the Mass Transit Account), Congestion Mitigation and Air Quality, and Transportation Enhancements.

It seems no politician wants to breach the topic of raising the gas tax, and that’s why researchers and the U.S. Department of Transportation, which commissioned Hanley’s study, are pursuing alternatives. A non-partisan commissioned was formed in Maryland to explore new funding opportunities proposed a 15 cent gas tax increase to be phased in over three years. I think there’s been more discussion to eliminate or reduce the gas tax, like this in May 2011 when Illinois “State Rep. Wayne Rosenthal…proposed the [5%] gas tax elimination measure which he says could reduce gasoline prices by up to 20 cents per gallon” (WJBC News via The Tom Warne Report).

Read more about this topic

• Summary of this project from the University of Iowa
• Tom Gonzales, a public policy fellow at the Chicago Metropolitan Agency for Planning, wrote about travel behavior and pay-as-you-drive insurance.
• CNN explores five myths of the gas tax, including that it goes up every year or causes volatility in gas prices.
• Statement on privacy implications and management from the study, hosted by the Federal Highway Administration
• There’s an emerging insurance product called “pay as you drive” where you pay insurance based on the exact distance you drive. Many insurance companies may currently base part of your insurance rate on how much distance you drive, using that as a proxy for how exposed to risk you will be, but this rate doesn’t measure your exact distance, instead placing you into broad groups like “drives a lot” or “drives a little”. You can read more about this on Wikipedia and see which companies offer usage-based insurance and where.
• GMAC Insurance probably has the widest available “pay as you drive” insurance, available to OnStar subscribers in 35 states.
• Progressive Insurance has a “pay as you drive” product available, but does not track your location. It’s called Snapshot.
• Allstate Insurance’s DriveWise
• State Farm Insurance Co.’s In-Drive

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People who subscribe to OnStar can use that device to possibly pay less for their auto insurance. Photo by Andrew Whitis. 

Notes

1. A mileage charge is also known as Mileage-Based Road User Charge or VMT (vehicle miles traveled) charge or tax.

2. Not all counties and cities in the United States may have the authority to impose gas taxes. However, Chicago and Cook County both charge a tax on gasoline sales.

3.  Participants were paid $600 to complete the study and were NOT charged for any distance they drove. The purpose of the study was to test the feasibility of mileage charging. Participants came from 12 cities in 12 states. Four were “big”, four were “medium”, and four were rural.

Updated November 18, 2011, 11:59, to make improvements in readability.