Laboratories of Democracy: Oregon’s Mileage-Tax
by Jeffrey L Garceau
In 2006, MuniNet Guide featured an article on a pilot program in Oregon testing an alternative means of taxing drivers for using Oregon’s roads. The participants had a global positioning device installed in their car, which determined the mileage traveled, and could track the vehicle to ensure that it was charged only for miles travelled within the borders of the State. The device would then transmit the information to a second device on the fuel pump, adding the mileage fee to the price of gas. The traditional gas tax would also be collected, and the state would reimburse the drivers for the gas tax.
As gas taxes are by far the most popular means for states to fund transportation development and maintenance, alternative revenues must surely follow alternative fuels.
The two main motivations behind this program were 1) to get in front of the developing technology of alternative fuel vehicles, and 2) to study the efficacy of using GPS to enact congestion taxes. The development and potential proliferation of electric, hybrid, biodiesel, and other alternative vehicles will greatly reduce the need for gasoline, without reducing wear and tear on roads. As gas taxes are by far the most popular means for states to fund transportation development and maintenance, alternative revenues must surely follow alternative fuels. The mission of this program was to be revenue neutral, and the program determined a flat rate of 1.2 cents per mile in order to achieve replacement of lost revenues.
The state’s Road User Fee Tax Force issued a report in 2007 on the findings of the program. Key findings of the program were:
- – Existing technology is viable for implementation of measuring and collecting the new tax.
- – The program was met with 91 percent favorability by its participants.
- – Implementation costs would be low, and privacy can be protected.
It is worth noting that implementation costs would be low due to the ability to phase in the mileage tax on new vehicles only. Fitting the tracking device on all old vehicles would be costly in time and money, but those vehicles could just keep paying the gas tax until they are eventually phased out. The gas tax would remain for out of state vehicles, so it would not be going away any time soon. In regards to privacy, the Oregon Department of Transportation implemented procedures so that the only data needing to be stored would be the VIN, total mileage, and mileage by zone (congestion zones, standard zones, and others). Any details about where or when vehicles are travelling would be destroyed once the mileage numbers are recorded.
A second report was issued in 2013, following a second pilot program conducted from 2012-2013. This second pilot program was deemed necessary due to the development of smart phones. The proliferation of these devices lessened the need for government to finance the development of a separate GPS device, and to intrude in people’s lives to require the installation of the devices into private vehicles. The separate device is still available, and up front installation makes less work for participants going forward, but the flexibility of options gives participants choices. This program was also implemented because of the publics’ concerns over privacy when evaluating the first program. The key missions for this program were to achieve 1) ease of use, 2) motorist choice, 3) open systems, and 4) private sector administration. Revenue neutrality was not a requirement of this program; the program charged 1.56 cents per mile, which resulted in a 28% increase in revenues over what would be generated by sticking with the fuel tax.
The success of the program will help determine the political will to expand the program…One of the primary concerns of citizens was privacy…
In 2013, the Oregon Senate passed Bill 810, beginning implementation of a program that recruits up to 5,000 volunteers to participate on a wider scale. This large scale public participation program was undertaken, rather than mandated implementation, in part because of citizen concerns. The success of the program will help determine the political will to expand the program in the future. One of the primary concerns of citizens was privacy; as such, the State of Oregon has contracted with three separate private entities to manage the accounts of program participants. The flexibility of the program has made it costlier than the more monolithic 2007 program.
The program, named OReGO, launched in July of 2015 as an open ended program, with no concrete plans for expansion. It charges volunteers 1.5 cents per mile. Oregon volunteers will continue to pay the fuel tax at the pump, and will receive a credit for their fuel tax payments based on how much their mileage fee. If they paid more in fuel tax than the fee, they will receive a rebate check from the government; if they paid less with the fuel tax, they will receive a bill. It will be interesting to see how this new tax develops, particularly in enforcement. It will also be interesting to see how congestion rates or other customized rate programs can influence driver behavior and road conditions.
As more hybrids and electric cars hit the road, and traditional engine cars attain higher and higher miles per gallon benchmarks, some new form of tax or fee will need to be successfully implemented to replace those lost revenues. The purpose of a mileage fee is not to force a new tax on top of the fuel tax, but to acknowledge that the traditional forms of funding transit maintenance are inadequate to account for changing technology. Those with the ability to take advantage of the new technology would be able to use and wear roads and bridges, while evading payment of their share to repair and maintain them. Quality maintenance of roads, bridges, and other transportation infrastructure is vital to a state’s economy and the well-being of its citizens. An expanded mileage tax would put the responsibility of paying for upkeep on those who use the roads most.