Oregon mulls details of miles-driven tax to pump up revenue

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Motorists are being urged to reduce their dependence on fossil fuels from the federal government, conservationists, and their own wallets. However, less money spent on gasoline comes at a cost.

Driving fewer miles, combined with the rising number of fuel-efficient vehicles on the road, has had an adverse effect on gasoline tax revenue across the country.

In Oregon, gas tax revenue – which the state uses to build and maintain roads – has dropped by $5 million a year. A plan has been in place to possibly raise Oregon’s gas tax another six cents per gallon starting in January. Now, the state has another idea, and some drivers are not happy about it.

James Whitty of the Oregon Department of Transportation (ODOT) told reporters at CBN News that, in the face of decreased gas tax revenue, ODOT has found a way to replace that money by abandoning a proposed hike in the gas tax with a tax on miles driven. With the help of researchers at the University of Oregon, ODOT has been testing a mileage tracking device that might soon be required on every Oregon vehicle. One of the major flaws with this plan, according to CBN News, is that it appears people who drive fuel-efficient vehicles will end up paying more.  

Here’s the example they cite:

"Assume everyone drives 1,000 miles per month. Under the gas tax, those who drive gas hogs and get 10 miles per gallon will pay $24 in state gas tax per month. Motorists who drive fuel-efficient vehicles, and get 40 mpg, pay only $6 per month in gas tax. That seems fair. But under a miles-driven tax, both drivers pay $12 per month in mileage tax (1,000 miles times 1.2 cents). For the gas hog driver who was paying $24 per month, he is now getting a half-off deal, compared to the previous tax. The driver of the fuel-efficient car is now paying double what he used to pay."

Needless to say, some motorists are not happy.

Chris Hagerbaumer of the Oregon Environmental Council doesn’t oppose the mileage tax, but she understands the frustration of some drivers. “I do think people who make environmentally conscious choices should be rewarded for that.”

When Hagerbaumer raised this issue with Whitty, he assured her that there would be some kind of adjustment for people who drive gas sippers, such as letting them pay a slightly lower per-mile tax.

“To me it seems like Oregon is going to punish people for doing the right thing” by trying to use less gas, Jason Williams of the Taxpayers Association of Oregon, told reporters.

Carpooling with Big Brother


Williams sees the device used to track miles driven as an invasion of privacy, as well as a “colossal waste of taxpayer dollars.” Implementing the program will cost a reported $33 million in Oregon, alone.

Dr. David Kim from the University of Oregon defends the program by explaining that the devices would be relatively cheap for drivers to install. In the testing, he said, they used off-the- shelf devices. He assured reporters that motorists will not have to do anything special regarding the tax. Equipment at gas stations will read the miles, deduct the gas tax, and charge the mileage tax. Drivers of electric cars, Kim said, might have to pay a surcharge on their electric bills.

The devices have raised questions about whether the government would be able to use them to track motorists' movements. “There is no trip data stored on the vehicle device,” Kim said.

Whitty agreed, adding, “We eliminated the tracking device because we didn’t want to know where they [the 300 participants in the university's research] were going.” He admitted that some of the research participants felt there was a sneaky environmental agenda behind the testing, “because we had a screen in the car so that people could actually see what was happening as they drove. Some people did drive less because they were more aware of it.”

Other states are now doing tests of their own, and they’re keeping a close watch on what is happening in Oregon. Oregon is pushing for this program to go nationwide, and so are some in Washington D.C. When the federal government started talking about implementing the plan nationwide, however, angry reaction from the public resulted in officials withdrawing the idea.

One problem appears obvious. If states want to increase revenue with a miles-driven tax, they can’t also promote decreased driving. Adding a per-mile tax is likely to reduce driving and tax revenue.

“An economist will tell you that what you tax, you get less of. So when you tax gas, that’s the most direct way to reduce the use of gasoline. When you tax miles, that’s the most direct way to reduce the amount that people drive,” said Hagerbaumer.

Questions remain

A miles-driven tax may be, at best, a temporary fix. Just as the high price of gas caused a loss of gas tax revenue, a miles-driven tax could do the same.

Williams, from the Oregon's taxpayers association, summed up the fears of a lot of people who he said are filling the blogosphere with angry protests. “The government might be coming to your dashboard any day now.”

When asked by AccountingWEB how the program would affect motorists passing through or visiting Oregon, David Nemchik, ODOT’s Fuels Tax Operations Manager, said",The Road User Fee Pilot Program (alternatively known as the Vehicle Mileage Tax) is still in its infancy. Your question is one of many that need to be answered for this concept to work at a national level. Out-of-state vehicles would most likely pay a fuels tax at the pump if they are unable to pay the mileage tax.”

For more information, read the report from the Oregon Department of Transportation.

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