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Pay per mile: A timely tax idea, or a privacy threat?

More fuel efficient vehicles along with alternative-fuel vehicle options will steadily undermine the viability of the gasoline tax, so how about a mileage fee?
Image: Cars are reflected in a truck in the traffic jam
Cars are reflected in a truck in a traffic jam on the 110 freeway in Los Angeles in 2009.Gabriel Bouys / AFP - Getty Images

As transportation officials struggle to raise enough tax dollars to maintain the nation's highway and transit systems, a tentative new proposal could put Americans on the hook for every mile they drive.

Department of Transportation officials have drafted legislation that would study a vehicle tax to track how far drivers travel and charge them by the mile. The proposal would create a “Surface Transportation Revenue Alternatives Office” to conduct trials of the concept.

The draft proposal was first reported this week in Transportation Weekly, a trade publication. A White House spokeswoman told The Hill newspaper that the draft "does not represent the views of the president” and is in no way an administration proposal.

The White House put the brakes on a similar proposal floated early in Obama's presidency, with then-spokesman Robert Gibbs said that a mileage tax "is not and will not be the policy of the Obama administration."

That didn't stop operatives at the National Republican Congressional Committee from asking in a press release Thursday whether Democratic House members will support " President Obama’s new driving tax."

The idea does have the support of some experts, who say it's a fairer way of charging drivers for the bridges and roads they use every day.  

A tax or fee on miles driven could possibly supplant the gasoline tax, which has has lost a third of its purchasing power since it was last raised by Congress in 1993. Since 2008, according to a Congressional Budget Office report, the money available in the highway trust fund has not been enough to cover federal spending on highways, requiring an additional injection of about $30 billion from the federal treasury.  

That report, which laid the groundwork for the draft, was conducted at the request of Senate Budget Committee chairman Sen. Kent Conrad, D-N.D.

Problems with gasoline tax
With continuing budget shortfalls for transportation projects, keeping the gasoline tax at its current level means some highways won’t get repaired in a timely fashion because the tax isn't raising enough revenue.

But raising the tax when a gallon of gas costs more than $4 in many parts of the country is a nonstarter for most members of Congress.

And the gasoline tax is pumping less money into federal coffers over time, as automobile companies continue to improve the fuel economy of cars they manufacture.

California’s gasoline tax, for example, increased from 7 cents per gallon in 1970 to 18 cents in 2009, but the real revenue per mile of travel — after factoring in inflation and improved fuel economy — declined by 70 percent, according to Paul Sorensen, a researcher at the RAND Corporation, a California think tank.

“Looking out a decade or more, more efficient conventional vehicles along with various alternative-fuel vehicle options will steadily undermine the viability of fuel taxes,” Sorensen told Thursday. “And fuel taxes will become increasingly unfair, charging more to owners of older and less efficient vehicles and less to owners of newer and more efficient vehicles.

Sorensen and some of his colleagues at RAND did a detailed study of the mileage fee concept in 2009.

Address the issue sooner rather than later
With the Obama administration encouraging people to buy fuel-efficient vehicles, “there’s a total contradiction in current government policy” in how highways are funded, said energy consultant Geoffrey Styles, who writes the widely followed Energy Outlook blog.

Styles said policy makers need to address this issue “before there are 20 million electric vehicles on the road."

"If we’ve waited that long, and all those folks have been used to driving those cars without paying any energy tax, then trying to change what we do is going to be a big disconnect,” he said.

The idea of a mileage tax isn't new. Transportation experts have been assessing for years a tax on the number of miles driven by each car owner.

In 2007, Oregon conducted a trial run of a fee based on the number of vehicle miles driven. When he was serving as governor of Minnesota in 2008, Tim Pawlenty, now a Republican presidential contender, proposed a $5 million study of mileage-based technologies.

And in Singapore, Styles said, devices in each car already track how far a car has been driven and the government charges the driver per mile driven.

How to protect drivers' privacy
As experts have recognized, many Americans would be wary of the idea of a government agency tracking their vehicle in order to tax the miles they drive.

“The problem comes the minute you introduce a device in the vehicle" because people "do not want the government to know where they are and where they are going," Styles said.

He said a less problematic approach would be for the mileage driven to be noted when state agencies do their annual vehicle inspections. That data could be forwarded to the federal government which could then impose its tax assessment on each driver.

But only two-thirds of states conduct vehicle inspections, meaning that some states would have to take on the additional costs of instituting odometer readings.

Sorensen said the government might also want to vary the tax rate — raising it for travel during peak hours to help reduce congestion — and it might want to use the data from devices in cars to monitor traffic jams or assess which areas are most in need of improvements. All of those ideas would require a tracking device in each car.

Still, Sorensen said, “if all you're concerned about is revenue, then reading the odometer would be fine," he said.