Pay per mile? What?
by Greg Krehbiel on 15 January 2013
The Obama administration is proposing to eliminate the federal gasoline tax and replace it with a tax based on the number of miles you drive.
This is a classic example of bad government, and it shows why central planning doesn’t work — viz., because central planners don’t know what they’re doing.
First they try to push a certain behavior — in this case, fuel efficiency — so people go out and buy fuel efficient cars. But wait — that creates another problem, so they make a new rule that changes the incentives.
Suckers!
How are people supposed to make rational decisions when the government keeps changing the rules?
And how is the government going to monitor how far you drive, anyway? A new agency? New federal regulations? A new device you have to install in your car?
The problem is that the federal government isn’t raising enough money to pay for maintenance of the roads. Assuming that’s really true, the obvious solution is to raise the tax on gasoline.
No, I don’t like higher taxes any more than you do, but I do think we have to pay real costs. I use the federal highways, and if it costs more to maintain them, then I have to pay more for that privilege.
All other things being equal — which they never are — a fee per mile makes some sense. So would a fee based on the gross weight of the vehicle. So would a fee based on whether you drive locally or use the highways. So would a gasoline tax, or a tire tax, or a tax on your vehicle registration.
There are any number of ways to raise the money. The question is which one creates the best incentives, and a gasoline tax seems right to me because it gives people an incentive to buy more fuel-efficient cars.
-- 2013-01-15 » Greg Krehbiel
15 January 2013 @ 1:42 pm
My first concern is that it gets introduced as a replacement to the gas tax and in the end it’s in addition to the gas tax. It becomes a like toll that is meant to pay for the construction and maintenance of a road and then just becomes a revenue stream.
Secondly how does this get enforced? 1) self-reporting, 2) a device attached to the odometer or 3) a tracking device. Number 3 is the simplest, cheapest, most frightening and likeliest. No gracias.
15 January 2013 @ 9:11 pm
I completely agree with Pigweed. It will become “in addition to” other tax streams. That’s why you have to starve the beast.
15 January 2013 @ 9:41 pm
Yes, I think Pigweed is right that they will want to add another tax rather than replace the current one.
However, the “starve the beast” theory has not worked because if you starve the beast all he does is borrow.
“I would gladly pay you Tuesday for a hamburger today.”
16 January 2013 @ 10:54 am
this doesn’t seem like a sound idea to me either. i’m quite curious about proposed enforcement on the mileage … i think only about 17 states require vehicle inspections, and don’t think the govt has the right to monitor your vehicle with any installed/attached technology. the honor system would be an abject bust. i wonder if there’s a database of some kind that monitors VIN #s and related maintenance where mileage would be reported/tracked?
17 January 2013 @ 12:39 pm
one possible way to collect a new tax based on miles driven would be to use car and truck insurance companies as intermediaries.
another way to collect the information with lowered risk to our freedoms and our right to privacy would be to install some sort of device on the wheel or hubcap of a car. You see these devices on tractor-trailers all the time. The device tracks the distance driven but does not keep any records (as far as I know) about the locations driven.
I think that the idea of a tax based on miles driven makes a great deal of sense to people who believe in green energy. For example, if in 10 years we are all driving automobiles powered by solar panels and recycled cooking oil and fairy dust, how we pay for road maintenance, let alone the fairy dust refueling locations?
Unfortunately, I am sure there are some in government who would love to know all about our driving habits. some might even believe that they know better than we have about which trips are worthwhile and which trips are appropriate, that everyone gets their “fair share” of transportation related resources. I am sure such people are very much in the minority.
I believe it would be a major disaster if the federal government expands its current database of driving and transportation habits (e.g. currently available from automated tollbooths and metro cards). computer systems are simply not as secure as you think. If and when the government develops a database that tells them when you are on vacation, you can be sure that some of that information will get into the hands of criminals.
17 January 2013 @ 12:57 pm
Overall agree with the thoughts here and a gasoline tax is a fine way to go and I don’t like the invasiveness of a mile tax.
But I wanted to say the idea of a tire tax as an alternative is intriguing. The problem (or so I hear) with the gas tax is that it gives overly strong breaks to ultra fuel efficient cars (including pure-electrics). A tire tax would still have the component of incenting smaller more efficient cars, without giving them a complete break.
I suspect the biggest problem is that it would have to be a HUGE tax to equate to the gas tax on a per purchase basis. A swag at the math:
-average car drives ~10k miles a year
-25 mpg correlates to 400 gallons
-approx 20 cents in tax means $80/car/year
-60k tires last for 6 years or so, so would require $480 in tax, or somewhere in the order of 150% tax (assuming $75/tire).
Somehow I don’t think that would fly.
17 January 2013 @ 5:40 pm
How about getting rid of subsidies on petroleum, and using the saved money to build roads? The market could take care of cutting fuel waste, people could make rational decisions about fuel economy, …..
Everybody here knows I’m not a “free market extremist” by any means, but there are some things the market does very well.
17 January 2013 @ 6:45 pm
Speaking of oil subsidies, here’s an interesting article about what they are, and why you probably don’t really want to cut them.
The Surprising Reason That Oil Subsidies Persist: Even Liberals Love Them
17 January 2013 @ 10:19 pm
Oh, nice. So now I can drive my four-wheelers and tractor all over the farm at a reduced rate and you guys can pay tax on your mileage???
So, does a huge rig which weighs fifteen times as much as my car does and presumably wears the road down fifteen times as much pay the same rate per mile?
I smell a lobby.
18 January 2013 @ 9:24 am
Dave — I think you’re on to something about the “per mile” fee as the brain child of people who believe that we’re moving to a situation where cars run on … other things. Magic or fairy dust or sunlight or whatever.
I think it creates the wrong incentives during the transition, but we’d have to have something like that afterwards.
Ken — do you think math will stop Congress?
John — did you read the article on petroleum subsidies? Specifically which subsidies would you want to cut?
Deb — there is definitely a lobby involved. And Will says you make funny faces when you drive your four-wheelers — in case you didn’t know.
18 January 2013 @ 12:21 pm
The article makes the valid point that “oil subsidies” can be a badly misused term. What I am in favor of getting rid of are those de-facto subsidies that prevent the end user or developer of a resource from paying the full, real cost of the use and/or development of that resource.
So when coal companies can pollute groundwater and be held harmless, this results in enormous cost to the people in the region. The coal companies and their customers should be bearing those costs, not the kids growing up in Appalachia with no teeth thanks to selenium in the groundwater.
When the military might of the United States is mustered to “stabilize” petroleum producing regions, those costs should be fully born by developers and users of that petroleum.
Should agricultural users pay taxes that build roads? Probably not (except in the broader sense in which they benefit from roads).
But in general, the Forbes article suffers from the kind of nebulous hand-waving and subject-changing that may persuade, but does not inform.
18 January 2013 @ 12:40 pm
Generally speaking I agree that customers should pay the real price for things, but it’s not always possible to do that, and in some cases it has been considered not desirable. For example, industrial energy users subsidize residential energy prices. I don’t know if that’s good, but that’s what we do.
Also, there are some things that we want to be both cheap and stable because it (allegedly) makes for a more stable economy. Food prices is an example — which is why we have those big farm bills. Energy prices might be another example.
The Rural Electrification Act required energy companies to run completely uneconomic power lines out to farm communities because that was considered a good thing for society. If they had to pay the real cost of that electricity, they never would have purchased it.
I’m not willing to be a market purist and say that every price has to reflect all the correct costs. It’s a good general rule, but there are some situations where you can’t do it, and other situations where you shouldn’t do it.