As gas tax yields less revenue, renewed focus is placed on a mileage tax

Higher fuel efficiency standards and a weak economy have made the motor-fuel tax—the principal fundraiser for road costs in the US for 80 years—increasingly less viable. As better mileage becomes the norm in the American car industry, consumers will use less fuel, thus decreasing government revenue from a fuel tax. In 2009, the federal government pulled in $31.7 billion from the tax, the lowest in five years, with even further declines expected.

A mileage tax was first introduced as an alternative to the fuel tax a decade ago. The tax could raise adequate revenue and charge all users fairly, according to James M. Witty of the Oregon DOT. The idea is simple: the more you drive, the more you pay. The tax owed would depend on a per mile fee established by Congress and state legislatures. Combined, the federal and state portions are estimated to total around two to three cents per mile.

Witty also advocates market efficiencies in the collection of the tax. “The government should apply a light touch to the collection system. Rather than relying on any particular technology, a more open approach would let the marketplace supply necessary data collection equipment and services, certified for consistency”

Just this year, Oregon considered applying a mileage tax to electric and plug-in hybrid vehicles. To encourage support, the tax would not begin until 2015 and would be set at 0.85 cents per mile, graduating to 1.56 cents per mile by 2018. In the end, though, the bill failed to gain acceptance since it was, after all, a new tax.

For more, see the op-ed in Bloomberg.