The Netherlands has taken the plunge on a very good idea. The Dutch cabinet recently announced a new “pay-as-you-drive” tax plan.
The initiative, which is the first of its kind in the world and still awaits passage by Parliament, would introduce a three-cent tax for each kilometer driven in 2012, rising to 6.7 cents in 2018. But the tax won’t be uniform. It will be higher during rush hour and on cars that guzzle more gas. To somewhat balance out the new tax, the road tax will be eliminated and a new-car tax will be slashed.
Something like this has been proposed in the U.S. In February, Transportation Secretary Ray LaHood broached the idea: “We should look at the vehicular miles program where people are actually clocked on the number of miles that they traveled.” But that trial balloon was shot down by the White House before it was barely off the ground.
It’s a shame because it’s a concept worth taking seriously. The National Surface Infrastructure Financing Commission, also in February, released a report (PDF) endorsing a vehicle-miles-traveled (VMT) fee as the most viable approach to fund federal investment in our road infrastructure. Today, that investment is funded by gas taxes, but those haven’t been raised in years, and now generate about one-third of the funds necessary to keep the highway system from deteriorating further.
The tax would be adjusted based on factors like time of day, type of road, vehicle weight, and fuel economy. A GPS system would keep track of the information necessary to accurately charge taxes.
Aside from becoming a more stable source of infrastructure funding, the VMT fee would send market signals that could lead to quality-of-life improvements. Prices set higher during rush hour could prompt some people to make fewer trips, use more public transportation, do more telecommuting, and/or choose to travel at alternative times, easing traffic in the process. (A pilot VMT project in Oregon resulted in a 12-percent decrease in vehicle miles traveled.)
There are legitimate concerns about a VMT fee — privacy issues not the least among them (though those are addressed well here) — but the upside is too good for it to not be a part of the transportation policy conversation. Perhaps it will be once again if the Dutch experiment proves a success.
Tags: Clean energy and technology, Europe, Infrastructure, Taxes, Transportation
I dunno, Elbert. I see “The tax would be adjusted based on factors like time of day, type of road, vehicle weight, and fuel economy. A GPS system would keep track of the information necessary to accurately charge taxes” and just think “overhead”. What’s wrong with just kicking the gas tax up a few bucks and using tolls? The tax already covers vehicle efficiency and total miles issues and incentives, and modern “EZ-Pass” tolls can easily address highway use, and be set up to adjust for time of day. And these systems use existing tax/fee infrastructure.
I certainly agree with using increased gas taxes to reduce other taxes and fees, though.
All valid points. I’m also a proponent of hiking the gas tax. But VMT tax has a couple of advantages. One, if you’re using it strictly for infrastructure funding, which is what is being proposed, the VMT tax is a more precise of way getting at one externality — the wear-and-tear on our roads based on actual usage. Another reason for why the VMT is better is that, particularly when targeted for rush hour, it will have more of an effect on easing congestion. I’m a fan of congestion pricing and this seems one way of doing it. That said, I’ll concede that this is probably not politically palatable, as my post suggests. And a gas tax is a better way of affecting behavior to mitigate climate change (as opposed to, say, drive-time choices). If cap-and-trade passes though, a gas tax becomes redundant — which makes the VMT tax a more appealing option to address traffic and infrastructure-funding issues.
[...] The Netherlands has taken the plunge on a very good idea. The Dutch cabinet recently announced a new “pay-as-you-drive” tax plan. Read more… [...]
Wouldn’t the VMT just add more bureaucracy and costs to collecting the tax? Why not just raise the gas tax? It acts in the same way and we are not reinventing the wheel. The more you drive the more you pay. There would be no new costs in order to collect the tax.
[...] Elbert Ventura on a vehicle-miles-traveled tax. [...]