Wednesday, September 25, 2013

Paying By The Mile Is A Terrible Idea

September 25, 2013, 9:00 a.m. (And see, "Gas Tax Critics: A Response," Dec. 10, 2013.)

The Gasoline Tax Is Our Friend
Don't it always seem to go
That you don't know what you've got
Till it's gone
-- Joni Mitchell, "Big Yellow Taxi"

As children we used to sing "London Bridge Is Falling Down." It involved a land far away, a fantasy, because none of us had ever heard of a bridge actually falling down.

Now we have.

We're told many of Iowa's bridges are in need of replacement or repair -- including our own Park Road bridge over the Iowa River. Roads, too, are crumbling and in need of replacement.

It all costs money. How to pay for it? For years it's been paid for with the federal and state gasoline taxes. Today "tax" is one of our few three-letter dirty words. Political rhetoric permits a discussion of "taxes" disconnected from a consideration of what we buy with them. Taxes are, after all, just another way of buying stuff we need -- like roads and bridges. Paying nothing for roads and bridges is not an option. One way or another we'll either pay for them or we won't have them. But in order for the gasoline tax system to work, the taxes need to be raised to a level that recognizes both inflation and current need for funds. Politicians who have convinced their constituents that taxes are evil are reluctant to do this, and are looking for alternatives.

Current proposals to substitute a kind of mileage tax, or toll road, for gasoline taxes are, unfortunately, gaining favor. Before these ideas go much further, it's time to explain why they are little more than a shell and pea game designed to further enrich the oll and automobile manufacturing industries.

One of the primary virtues of the gasoline tax is that it is what's called a "user fee." The more you drive on the roads, the more gasoline you'll buy, the more gasoline tax you'll pay, and the more you'll contribute to the building and maintenance of the roads you use. Unlike the railroads that must pay the whole cost of building and maintaining their roadways, the trucking companies have all of us pitching in to build their roadway system. [Photo credit: multiple sources.]

Ah, say the mileage fee advocates, but under our proposal the amount paid by drivers would also be tied to their usage.

To which I reply, "Yes, but . . .." Yes, but look at all we give up in the process. Abandoning the gasoline tax system, as Joni Mitchell reminds us, is going to leave us with the realization that we didn't know how good we had it before it disappeared.

Crumbling roads and falling bridges are not our nation's, and our state's, only challenges. (1) All Iowans, but especially our farmers, are discovering what "climate change" means in our day-to-day lives and business operations. We need to do everything possible to reduce our use of fossil fuels. (2) And, to the extent our dependence on fossil fuels will continue, we want to become as energy independent as possible. When "our oil" somehow gets beneath the sands of Middle Eastern countries, it costs us trillions of dollars, and thousands of lives, for our military to go get it out for us.

There are many reasons why the gasoline tax is not creating the revenue we need to keep an adequate vehicular infrastructure up to snuff. Mostly it's the failure to raise it to the levels required by inflation.

But it's also a good news, bad news story. You want the good news first? OK.

There are three other factors at play. (1) Higher gas mileage cars and trucks, (2) hybrids, and (3) electric vehicles (along with some other alternatives) all use less gas per mile than the averages when the gasoline tax was put in place. As a result, we are both (a) putting less volume of greenhouse gases into the environment than we otherwise would be, and (b) are less dependent on foreign oil supplies. There are many motivations and forces that support the growing interest in these three alternatives to low mileage cars and trucks, but a major one is the price of gas (including the gasoline taxes).

That's the good news. The other side of that coin is that, notwithstanding the benefits of our using less gasoline, the less gas we use the less revenue the gasoline tax produces, the less money we have for roads and bridges.

So why not substitute a mileage charge? There are many reasons. But whether you eliminate the gasoline tax, reduce it, or hold it at present levels, one consequence is that doing so reduces the marketplace incentive to produce and purchase better gas-mileage vehicles, including hybrids and electrics -- which is something we should want to encourage, not discourage.

By raising the gasoline tax to the levels necessary to maintain our road and bridges infrastructure we can actually increase the incentive to fuel efficiency.

It is difficult to change an entire nation's culture and habits -- as we have seen with tobacco use. But note that, in that case, we used all of Larry Lessig's four options for modifying human behavior (law, norms, market, architecture). We have laws that prohibit smoking in some places. The norm is that smokers ask permission to smoke in your presence (or simply refrain from doing so), rather than assuming it is of course OK, because, after all, "everybody smokes." And convenience stores have moved the cigarettes behind the counter, where they are more difficult for teenagers to steal (an "architectural" change). But one of the biggest factors has been a marketplace modification: teenagers are much less likely to take up smoking at $7.00 per pack of cigarettes than at $2.00.

When you pay by the mile, you can drive as low mileage a vehicle as you want -- a spiffy Hummer (some models get 9 mpg in city) or an inefficient old vehicle. You'll still pay more per mile for the gas, but at least you won't be paying a tax on top of that to maintain your roadway.

Another disadvantage to the mileage charge is the sheer administrative complexity of operating such a system, with its much wider array of possible fraudulent evasions than available with the gas tax.

My proposal? Continue to fund road and bridge construction and maintenance with gasoline taxes. Raise the tax rate to whatever level is necessary to do that. Continue to give the more efficient, and alternatively-fueled, vehicles the advantage needed by any new, socially beneficial technology when trying to change culturally embedded habits and (in the case of electrics' need for battery recharging stations) infrastructure. (That is, the advantage of paying less, or no, gasoline tax -- similar to what we've done during the early years of the Internet.) Years from now, when the alternative vehicles industries, and their necessary infrastructure, have crossed the threshold that make them sufficiently popular and profitable to stand on their own, design any one of a number of possible approaches for collecting a road-maintenance contribution from alternatively fueled vehicles.

But, please, think long and hard before adding, or substituting, a mileage fee system for the gasoline tax. Let's not wake up to discover that, "You don't know what you've got until it's gone."

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Anonymous said...

Good column. Gasoline use also has bad impacts on human health and the environment. The current cost of gas doesn't begin to cover the costs of those impacts -- they are externalized, the fancy word for "shoved onto others." The tax on gas should be raised in part so gas users (and I am one) start to pay more of what we owe.

jackdaw said...

The last time Branstead was Governor he instituted an additional 1 cent to the State Tax to pay for roads and Bridges!
When I drive my vehicles I am compelled to purchase a subsidized fuel, Ethanol I have no choice in the matter this is not an efficient additive to gasoline in fact it dilutes both the gas and my mileage! thereby taxing me by making me have to buy more inefficient fuel, who am I supporting the farmer! who destroys habitable land in order to pack more corn on a given acreage or roads and bridges which I use.

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