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Sales Tax, Gas Tax, Mileage Tax: How To Pay For America's Roads?

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Traffic in Atlanta, Georgia during rush hour (via Wikimedia)

Traffic in Atlanta, Georgia during rush hour (via Wikimedia)

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In Virginia, controversy is a-brewin' over Governor Bob McDonnell's plan to eliminate the state's gasoline tax. The funds generated from that tax have traditionally been earmarked for maintenance and construction of Virginia's roads.

To replace gas tax revenue, McDonnell plans to do three things: (1) raise the state's sales tax by about 16%, (2) increase vehicle registration fees, and (3) siphon off money from schools, mental health programs, and public safety initiatives.

Which is to say, he's planning to start a fight with elected officials on both sides of the aisle.

CRITIQUES

On the right, many groups take issue with McDonnell's plan to rely on sales taxes for roadway funds. The Competitive Enterprise Institute, a libertarian think tank, says that McDonnell is correct when he insists that the gas tax is stagnating. However, CEI also points out that the gas tax may be the most accurate gauge of road usage and therefore, the best source of revenue.

CEI's Marc Scribner insists that "New vehicle fleet and driving trends are quickly rendering the fuel tax obsolete. But abandoning the user-pays/user-benefits principle, which has long guided transportation funding in the United States, is not the answer." Instead, he says that "[s]trengthening the user-pays principle through all-electronic tolling and other mileage-based charges is the most prudent and fiscally conservative approach."

Translation: the people who use roads should pay for their upkeep, and money should be collected from those folks via tolls and other charges, based on how far users drive.

On the left, McDonnell is likely to face opposition from Democrats, who have often been very uncomfortable taking funds from education, healthcare, and other public/social services to pay for transportation infrastructure.

In the middle, we find the Washington Post, which agrees with McDonnell that the gas tax is an inadequate source of revenue for roadway maintenance, but also points out that his plan to rely on sales taxes and money pilfered from other state programs won't meet the anticipated costs. On average, the pricetag for maintaining and constructing new roads in Virginia is about $1 billion per year; McDonnell's new plan would only generate about $600 million.

AND AT THE FEDERAL LEVEL...

Meanwhile, just down the (increasingly bumpy) road to Washington, D.C., the Government Accountability Office seems to echo some of Scribner's ideas. After studying the issue, the GAO suggests that the federal government should consider taxing drivers on vehicle miles traveled (VMT). 

But doing so would not be easy. The GAO points out that there are significant privacy concerns in using devices like GPS to track drivers and, in turn, tax them on their travels. Nor would such a system come cheap. In a press release, the GAO states that "implementing a system to collect fees from 230 million U.S. passenger vehicles is likely to greatly exceed the costs of collecting fuel taxes" -- at least for the first several years.

Once the VMT system is set up, it would need to generate $34 billion each year just to replace current gas tax revenues. If things went extremely well and the feds generated $78 billion, they'd be able to maintain the roadway status quo. To truly improve the quality of our highways and byways, the government would have to raise significantly more moolah.

Naturally, this would mean added costs for drivers. On average, motorists in the U.S. now pay $96 in federal gas taxes. To reach the $34 billion mark, drivers would need to pay slightly more: $108 per year. (Though the GAO doesn't explain the discrepancy, it may involve offsetting the cost of VMT implementation.) To generate $78 billion per year, each driver would need to fork over about $248.


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Comments (15)
  1. Rich - why not just add $100 to the annual auto registration and eliminate all the GPS 'hoccus pocus?' Although no one likes the idea of paying more for anything, I would rather pay an annual flat fee than create another level of government which could lead to their temptation of putting all the 'neat' info they'll gather, about where and when we all are driving, to uses never intended! After all, just because I'm not necessarily a conspiracy theorist, there is a lot of evidence out there that I could very well be wrong ;>)
     
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  2. While that could work in theory, it would be fairly complicated. Auto registration is done at the state level, so that every state would have to pass legislation upping its auto registration fee. If that money goes to the feds, there's still the problem of maintaining state roads. If it goes to the state, what happens to federal highways? Not an easy problem to fix, unfortunately.
     
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  3. The theory of "user pays", which is valid and appropriate, is based upon the idea that the "user pays in proportion to the cost that he is responsible for creating"; i.e., the road maintenance and repair costs associated with his usage of the roads. Given that damage to the road is somewhat proportional to the weight of the vehicle (a moped or a Honda Fit will not cause as much damage to the road surface or the roadbed as will an F450 pulling a 32 foot fifth-wheel RV). This fact is recognized and incorporated into the fuel taxes paid by 18-wheelers, and is just as valid and appropriate for passenger vehicles. The gas tax also takes this into account (heavier vehicles generally use more fuel than lighter vehicles), but sales taxes do hot.
     
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  4. I am amazed at all the fixes they come up with and what they plan to do. The mileage checking would cost millions to implement. No one thinks of that. Why are they afraid to just add 50¢ per gallon of gas and make mandatory that it go for roads and bridges. That would be the simplest resolution.
     
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  5. That's an interesting idea, but it would involve Congress increasing taxes, which many, many politicians are loathe to do.

    Complicating matters: as gas prices go up, usage goes down -- either because people travel less, or because they opt for more fuel-efficient cars, or both. So even if the tax passed, it's doubtful that the government would gain a full 50 cents per gallon.

    But it's a thought.
     
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  6. Richard, you are right. It seems to be political suicide to propose a gas tax increase. All taxes are regressive. However, we need some tax for roads. Some ideas cost more than others to implement.
     
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  7. (Continued) The sales tax does not, and (unless it is only levied on fuel purchases, in which case it is a de facto fuel tax) does not even relate to the amount of damage caused. The same is true of a tax on vehicle miles driven. The fuel tax is not perfect, in that it does not consider fuel efficiency (a 4000 pound vehicle getting 30 mpg will pay the same as a 2500 pound vehicle getting 30 mpg, even though the heavier vehicle will cause more damage), but maybe that can be overlooked on the basis of the public good of encouraging greater fuel efficiency. This leaves us with the current system, with the only way to increase revenues being an increase in state and federal fuel taxes (gasoline and diesel, including commercial vehicles), but
     
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  8. (cont) still does nothing to address the "free ride" enjoyed by electric (and to a lesser extent by hybrid) vehicles. It also does not address the complaints of "fairness" advocates who properly point out that any of these systems is regressive, in that the poor will pay a greater proportion of their income than will the wealthier (the argument being whether or not that really is unfair, on which I have no position). The only viable way that comes to mind for addressing that would be a state/federal income tax exemption based upon fuel taxes paid, further complicating the tax code. I don't claim to have all of the answers, but I believe that these are concerns that should be considered prior to imposing any new taxes. Sorry for the leng
     
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  9. Don, I agree the electric and hybrid cars get somewhat of a "free ride". However, they are only 1.5% of total car sales. All taxes seem to be regressive. The majority of cars would be included.
     
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  10. Solution?
    State Gas Consumption Fee; Placed on the bill of sale of new and used autos that would go to that State's fund for roads repair, etc.

    $150 fee on autos getting less that 10 overall MPG EPA.
    $100 fee on autos getting less that 15 overall MPG EPA.
    $75 on autos getting less that 20 overall MPG EPA.
    $50 on autos getting less that 25 overall MPG EPA.
    $25 on autos getting less that 30 overall MPG EPA.
    $0 Fee on autos getting over 30 overall MPG EPA.
     
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  11. Nice idea for new cars, maybe used.. However, the average person keeps their car for 10-11 years. The older the car, the worse the mileage. Also implementing this system would cost millions. Sorry, I still think raising the gas tax would be the cheapest to implement.
     
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  12. Thanks for the article.


    For info on people using voluntary Libertarian tools on similar and other issues worldwide, please see the non-partisan Libertarian International Organization @ http://www.Libertarian-International.org ....
     
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  13. Like most out-of-touch politicians, McDonnell is wrong on two out of three revenue producing proposals. Sales taxes are the most regressive form of taxation in existence hurting those the worst who can least afford them. And it's real intelligent to propose taking money from schools (maybe a good idea from school Administrator's obscene salaries ?) and Mental Health programs. Perhaps some of the FAT should be cut from State budgets like private enterprise has been forced to do ?
     
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  14. So if you start taxing people based on mileage driven eventually only rich people will be able to afford to travel by car.
     
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  15. Maybe we should charge the so called" job provider's" who tear up our roads with there big rig's.The Koch brother's of the world think there not getting anything for there tax but there getting a free pass on our infrastructure that make there business possible.
     
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