Gas Tax vs. Mileage Tax?

An Oregon enviro poohbah sent out this query:

http://www.blueoregon.com/2009/01/of-mileage-and.html

Of Mileage and Gas Taxes

Jeff Alworth

I was pondering the question of the Governor's proposed mileage tax yesterday while listening to the rebroadcast of Think Out Loud. Because they are both related, the mileage and gas taxes are often discussed together. But, based on my pidgin economics, learned mostly on blogs, this seemed backward. Shouldn't you first ask what you're paying for and what behavior you want to promote? So I went to a econ blog and lo, the blogger was asking the same thing:

If you are proposing Pigovian taxes, then both make sense but address very different things. Driving a car imposes external costs through the impact on the environment, through the wear and tear on the roads and through the time cost of congestion.

A mileage tax addresses the wear and tear issue. People who drive will be assessed a tax that is equivalent to the cost of the road wear they are responsible for.... The gas tax is Pigovian in addressing the environmental impact of the amount of carbon emitted which is exactly related to the gas used.

It is clear that each tax is also a poor way to address the other issue, to wit: a gas tax is not a good way to address wear and tear because a Prius could do a lot of wear and tear with little gas and a Mustang could do little wear and tear with a lot of gas; and a mileage tax doesn't work, for the very same reason, as a way to address environmental impact.

But even if you're clear which about objective you're targeting, there are other ramifications. Take the mileage tax. People are innately queasy about having a government agency tracking their car--and reasonably so. What happens to this info? Who controls it and who can access it? Another feature of this proposal involves taxing you more for driving during rush hours or in congested traffic. Is this a reasonable penalty for people who already feel penalized by being stuck in traffic in the first place? Presumably, they'd avoid the congestion if it was avoidable. What behavior do you hope to incentivize here?

The gas tax, which is less complex, nevertheless has complications. On the green side of the ledger, it's a no-brainer. It acts as an incentive for people to drive more fuel-efficient cars or drive less. It penalizes those who use gas-guzzlers proportionately. But on other sides of the ledger, it's not so great. As lower-income people are forced further outside of the city core, transportation costs are borne disproportionatley by them. And it effectively amounts to a tax on rural residents who have no access to public transporation. It's true that the correlation between carbon production and taxes are directly relational, but again, are you penalizing people who can't change their behavior?

Hmmm. Your thoughts?

I've started several times to respond with cogent analysis and keen insights about the pros and cons of gas tax vs. mileage taxes ...

But I end up stopping because this whole discussion ignores the elephant -- heck, the blue whale -- in the driveway.

Somehow we've gotten snookered into having a discussion about how to get drivers to pump more money into pavement (or maintain the amount that they are pumping into pavement) without discussing the fact that the impetus for the whole thing --- the fact that fuel taxes only pay a small (and declining) share of what we're spending on roads --- means that we're sitting around spending all this energy discussing the smallest portion of the problem, rather than the largest part (the general funds and property tax millages spent on roads).

Before we discuss fuel taxes vs. mileage taxes vs. congestion pricing or whatever, we FIRST must resolve to do what so many Oregonians mistakenly think we already do: pay for roads with gas taxes (or their user-fee equivalents, mileage taxes/congestion pricing, vehicle excise taxes, etc.).

In other words, FIRST we must take general fund and property tax millages out of the equation -- eliminate these taxes. THEN we can have the good discussion about how best to allocate the cost of roads across the fees and taxes that come from road users (gas tax, mileage tax, congestion pricing, registration fees, vehicle excise tax and weight taxes). We can talk about adding fees for non-motorized vehicles (bicyclists) as well, such as the clever idea that all vehicles should be registered annually, with the fee based on weight.

Instead, somehow, Oregon environmental groups have decided to help preserve and extend the auto-dominated system by helping finagle more money for roads, instead of fighting to shift road funding onto road users.

And it's not true that people who don't drive should pay property taxes for roads or else they get an unearned benefit ("free rider"). People who don't themselves drive on roads pay their share of roadway fees/taxes through the prices of the goods and services they use. As we shift the costs of roads ONTO the roads -- rather than onto houses, farms, nursing homes, apartment complexes, and other property tax sources -- then we'll see shifts in the costs of goods and services that reflect the amount of transport that they require ... which should be the goal of any environmentalist (get the prices right) as well as any politician (cut general property taxes).

So while the ins and outs of gas taxes vs. mileage taxes can be fascinating sociologically and politically, the real answer is "Sorry, wrong question."

The right question is how fast we can cut taxes and millages that DON'T derive from road uses and how soon we can get to zero; on the way, we can have lots of good discussions about how to make up that revenue with the various use-based fees ...