Oregon to test mileage tax as replacement for gas tax
CORVALLIS, Ore. — Let's pretend someone
waves a magic wand and turns every car into a fuel-sipping, gas-electric hybrid.
What difference would it make?
The air would be cleaner.
Oil imports would drop.
And the transportation budgets of Oregon, Washington and almost every other state would deflate like a punctured balloon.
Think about it: Most money for highway construction and maintenance comes from state and federal taxes on gasoline. If people bought a lot less gas, highways would get a lot less money.
In Oregon, a state task force has concluded this scenario isn't all that far-fetched. It has proposed a possible long-term replacement for the gas tax, something no one has tried before:
A tax based on how many miles you drive.
The Oregon Road User Fee Task Force has spent two years fleshing out the concept, thinking through how such a tax might be calculated and collected. Now it's ready to test its ideas in the real world.
At the panel's request, Oregon State University researchers have developed technology that can distinguish miles driven in Oregon from those driven elsewhere, then allow a mileage tax to be calculated and paid at the pump in place of the state gas tax.
Next year, the researchers' mileage-recording devices are to be installed on 400 private cars in Eugene. Some of the volunteers will become the first people in the country to pay road taxes based not on how much fuel they burn, but on how far they travel.
A mileage tax has been discussed in Washington, too — not as a replacement for the gas tax, but as a supplement to it. A bill allowing the Regional Transportation Investment District to propose one to King, Snohomish and Pierce county voters cleared the state House of Representatives earlier this year. It died in the Senate, in part because no one could say exactly how the tax might work.
The Oregon task force, whose work has attracted national attention, has gone a long way toward answering that question.
But even if the Eugene field test resolves the technical and administrative issues, tough policy questions about privacy, equity and the environment will remain.
"We know that, if you do this in a certain way, you can actually make it work," says Jim Whitty, the task force's administrator. "But working through these issues is very, very difficult."
Four miles for a nickel?
In 1999, Ford brought some of its alternative-fuel-concept cars to Salem, Oregon's capital, for a demonstration. Bruce Starr, then a Republican state representative from the Portland suburbs, took a spin in a $6 million fuel-cell vehicle. "I got to thinking, 'What happens when you encourage high-mileage vehicles?' " Starr remembers. "That was in some respects the genesis of this."
Starr's epiphany led him to introduce the bill that created the task force in 2001. He became its chairman.
The panel spelled out the underlying problem in a 2003 report. Cars will get more fuel efficient as gas prices continue to climb, it said. More automakers will offer hybrids. The Bush administration plans to spend $1.7 billion over five years to develop fuel-cell vehicles that run on hydrogen.
So Oregon's gas-tax revenues will gradually level off, the task force said. Around 2014, it projected, collections will actually start to drop.
The panel sifted through 27 other options before settling on the mileage tax as a replacement. The other possible revenue sources either weren't user fees, had already been claimed by local government, or wouldn't generate enough money.
It suggested a tax of 1.25 cents per mile to eventually replace the state's gas tax of 24 cents per gallon. For a car that gets average gas mileage — 19.7 miles per gallon in Oregon — the total tax bill would be about the same.
But few cars are average. A 2004 Honda Civic that gets 36 miles to the gallon would pay more tax than today; a 2004 Range Rover that gets 12 would pay less.
Treating them the same is fair, Whitty argues. Each vehicle uses up about the same amount of space on the highway, he says, and there's little difference in the wear and tear they inflict on roads.
Besides, he adds, the gas tax was effectively a mileage tax 40 years ago, when almost every car got eight to 12 miles to the gallon. The introduction of fuel-efficient cars shifted more of the highway-finance burden to gas guzzlers, but "there was never public policy set for that," Whitty says. "It happened by accident."
Once the task force settled on a mileage tax, it had to figure out how to make it work.
The panel quickly decided Oregonians shouldn't pay tax on miles driven out of state. The problem: Conventional odometers don't make such distinctions.
It also decided the tax should be calculated and paid at the pump, so people wouldn't have to go to a government office or deal with another bill in their mailbox. The problem: Such a collection system didn't exist.
For solutions, the panel turned to Oregon State engineering professors David Kim, a former General Motors research scientist, and David Porter, an information-technology specialist.
They set up shop in an old storage compound, installing computers and a gas-pump simulator that does everything but pump gas. For more than a year, they tested different devices on three 1991 Dodge Dynasties the state once used to collect litter.
In the spring, Porter and Kim announced they had designed a system that did everything the task force wanted.
For vehicles, they crafted a device with an electronic odometer and a Global Positioning System (GPS) receiver that determines whether a car is being driven in a predetermined "zone" — inside or outside Oregon, for instance. The miles in each zone are recorded separately.
When the car pulls into a gas station, its mileage data is uploaded by short-range radio frequency to a wireless reader. It sends the numbers to the station's computer, which, in turn, asks a central computer for information on the car's last reported mileage.
Once that data arrives, the gas-station computer does the math. It calculates new taxable miles, computes how much tax is owed and relays that information back to the pump.
All this takes about as long as a credit-card approval, Kim says. After that, the gas station's computer subtracts the gas tax from the per-gallon price displayed on the pump. You fill your tank, pay for the fuel plus the mileage tax, and drive away.
Cars that don't have the odometer-GPS devices — older cars, out-of-state cars — won't have any data for the reader to download. They'll continue to pay the gas tax; the task force has concluded that, while the state could reasonably require the devices on new cars, retrofitting every vehicle in Oregon would be too expensive.
The system's use of satellite-based GPS technology raises the specter of Big Brother, of government tracking where and when you drive. "If you wanted to, you could design a system that would do that," Porter acknowledges.
But he and Kim say their system doesn't; the task force didn't want anything that intrusive.
Their on-vehicle device doesn't store trip details, the professors say — only total miles and the zones into which those miles fall. That's the only information that would be transmitted at the gas pump, they add; no one could use the technology to track you while you're driving, or reconstruct where you've been.
"All that would be stored is a number," Whitty says. "If the police wanted to go into that device, there wouldn't be anything to find."
As an added safeguard, the task force has recommended that collection and dissemination of information about a car's movements without the driver's consent be prohibited by law.
Such assurances don't satisfy David Sobel, general counsel for the Electronic Privacy Information Center in Washington, D.C. Oregon's prototype probably presents little threat to privacy, he says — but government officials almost certainly would want something more.
The state would need a record of a car's movements to document the mileage-tax assessment if someone contested it, Sobel says: "Just from a due-process perspective, there will be pressure to retain data."
Privacy isn't the only concern. Chris Hagerbaumer, of the Oregon Environmental Council, says a mileage tax that treats a hybrid and a Hummer the same would discourage consumers from buying fuel-efficient cars.
"The gas tax sends a valuable signal," she says. "I'd hate to see that go away."
Oil companies don't like the task force's plan to collect the mileage tax at the pump, through gas stations' computers.
"They want to go into our proprietary systems," says Brian Doherty, a lobbyist for the Western States Petroleum Association. "Would you open up your million-dollar computer and let them have access to it?"
The task force hopes to install mileage-tax technology at up to five service stations next year for its Eugene field test. It may have trouble finding guinea pigs. "Until we get real comfortable with it, we're not ready to go there," Doherty says.
The task force's timetable calls for the first 20 cars to be equipped with mileage recorders next February. The experiment should be in full swing by fall 2005. Later, the technology would be used to test "congestion pricing" — charging some drivers a higher mileage fee during rush hour, or in particularly congested areas, to see if they drive less as a result.
The test should be finished in early 2007. Then what?
If the experiment works, Whitty says, the task force probably would draft a bill proposing a statewide mileage tax. Starr, the legislator who chairs the panel, doubts it would pass right away.
He says he's comfortable with the system's privacy protections, but the public isn't yet. Cost is another big hurdle, Starr adds: The task force has calculated the on-vehicle devices might add up to $225 to the price of a new car.
It's probably unrealistic anyway for a small state like Oregon to adopt a mileage tax by itself, Starr says, but the task force's work could provide the foundation for a larger state or the federal government to take that leap.
Whitty agrees. "Oregon is the tip of the tail of the dog," he says. "It's hard to wag the dog from that vantage point."