Jun 28, 2023

States Weigh Charging by the Mile As Fuel Taxes Plummet

As fuel taxes continue to plummet, states across the United States are considering alternative stopgap measures such as charging drivers by the mile. The current state of fuel taxes has been heavily affected by various factors including reduced demand for gasoline due to the COVID-19 pandemic and the rise in popularity of electric vehicles.

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With fewer people on the roads and a push towards greener transportation options, revenue from traditional fuel taxes has taken a significant hit.

Let's talk more about this in this article. 

The Concept of Charging by the Mile as Experienced by Real-Life People

Evan Burroughs, a resident of Columbus, Ohio, has dedicated a remarkable eight years of his life to advocating for the remarkable merits of Oregon's pioneering pilot program, which entails motorists being billed according to the distance their vehicle travels, rather than the conventional fuel consumption. However, despite his unwavering commitment, it is disheartening to note that even his own mother has not fully embraced this groundbreaking concept.

Margaret Burroughs, aged 85, firmly affirms her decision not to incorporate a tracking device onto her Nissan Murano for the purpose of logging her grocery shopping trips or needlepoint society gatherings. In her discernment, she concludes that it is considerably more convenient to settle her dues directly at the fuel station, a practice that has been ingrained in American culture for well over a century.

She expressed her perspective on Oregon's pioneering initiative, managed by the state's transportation department, acknowledging its potential benefits but noting its additional burden amidst the preexisting stress experienced by all. This sentiment was shared while considering her son's role as a survey analyst within the aforementioned department.

The hesitancy demonstrated by Burroughs serves as a poignant representation of the extensive array of obstacles that U.S. states encounter while venturing into road usage charging initiatives, which seek to eventually supplant motor fuel taxes. The decline in revenue from fuel taxes, attributable to the increased fuel efficiency of vehicles and the burgeoning popularity of electric cars, further compounds the challenges faced by these programs.

The forthcoming programs mandatory of federal government is on the verge of embarking upon its own endeavor, with a substantial financial backing of $125 million derived from the infrastructure measure legislation endorsed by President Biden in November 2021. This is a legislative activity that needs more academic attention with a decade of pilot projects to come.

In line with the earliest pilot projects, will it really fund transportation projects?

The Three States That Use Road Usage

To date, road usage charges have proven to be a lucrative revenue stream for only three states - namely Oregon, Utah, and Virginia. However, the pressing concern of an increasingly significant disparity between states' transportation budgets and the income derived from gas taxes persists.

Hawaii is poised to join this group as the fourth state to implement such charges. Inaction on this matter could result in a staggering $67 billion ever-widening gap by 2050, solely attributed to the advancements in fuel efficiency, as per the estimations of Boston-based firm, CDM Smith.

So basically, there is ongoing revenue from road usage in these states. 

Other States' Imposures and Implementations

Numerous states have successfully adopted interim solutions, including the implementation of supplementary levies or registration fees applicable to electric vehicles. Furthermore, in a more recent development, these states have introduced taxation schemes based on kilowatt-hour consumption of electricity availed at publicly accessible charging stations.

In the previous fiscal year, the state of Colorado initiated the implementation of a 27-cent tax levy on residential shipments facilitated by prominent e-commerce entities such as Amazon, with the purpose of generating revenue to support critical transportation endeavors. Concomitantly, several other states are currently engaged in pilot programs aimed at examining the efficacy of electronic tolling mechanisms.

However, there is a significant focus on mandatory road usage charging among scholars, researchers, and lawmakers, with considerable academic scrutiny, research funding, and legislative efforts being directed toward mileage-based user fees, distance-based fees, or vehicle-miles-traveled taxes.

The Transportation Program Director's Thoughts

According to Doug Shinkle, the esteemed transportation program director at the nonpartisan National Conference of State Legislatures, it is projected that after an extensive period of approximately 20 years of eager anticipation, coupled with over a decade of pilot initiatives and several years of voluntary involvement, states will soon find themselves compelled to institute obligatory measures for these programs.

Based on his statement, the current driving force is not primarily focused on generating revenue, but rather on the implementation and refinement of these systems. Its primary objectives include addressing any operational challenges, fostering public confidence, and increasing overall awareness of the initiative.

The data released by the U.S. Bureau of Labor Statistics show the percentage of electric car or electric vehicle sales in the United States witnessed a significant surge, escalating from a mere 0.1% of total car sales in 2011 to an impressive 4.6% in 2021. Encouragingly, S&P Global Mobility anticipates a remarkable growth trajectory for electric vehicles, projecting them to constitute a substantial 40% of total car sales by the year 2030. This promising outlook aligns with several other projections, which also paint an optimistic picture of the future expansion and dominance of electric cars in the market. 

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The Executive Director of Eastern Transportation Coalition's Thoughts

Patricia Hendren, the esteemed executive director of the Eastern Transportation Coalition, emphasized with an optional message the utmost significance of addressing the complexities associated with tracking multistate journeys, specifically in the eastern region of the United States. There are state and community guidelines to be followed.

Unlike their Western counterparts, the proximity and relatively compact size of Eastern states necessitate meticulous consideration. With Virginia spearheading the nation's most expansive program since its inception in 2022, it is poised to yield invaluable insights and serve as a beacon of knowledge for future endeavors. With that, it made every comments relevant for review.

Hendren's Institute, an esteemed consortium spanning 17 states dedicated to investigating advancements in transportation safety and technology, actively engaged in pioneering initiatives during the nascent stages and has subsequently participated in eight additional projects. It is a voluntary participation by the way. One of the primary challenges, as articulated by Hendren, revolves around effectively disseminating information to the general populace regarding the declining benefits derived from the longstanding utilization of gasoline taxes for financing road infrastructure.

Hendren expressed that the matter at hand pertains to the interconnection between individuals utilizing our transportation infrastructure and the means through which we finance it. He emphasized that the longstanding approach we have adopted for the past century is no longer viable.

A Transportation Analyst's Thoughts

Eric Paul Dennis, a transportation analyst employed by the Citizens Research Council of Michigan, has expressed concerns regarding the efficacy of road usage charging, as states have thus far been unable to successfully implement a fully operational and obligatory program despite years of dedicated research. This raises pertinent inquiries as to the feasibility and practicality of such a system. As a road user, you just don't want to be buzzed on your email address with an email notification saying that you received charges mandatory. 

According to him, there is currently no program design that I have come across that I believe can be effectively implemented on a large scale in a manner that would be widely accepted by the public. However, this does not imply that it is impossible to devise a program capable of achieving such outcomes. Nonetheless, if one is unable to even conceptualize a program framework that appears viable, it would be prudent to exercise caution and refrain from placing excessive trust in it.

The road usage charging initiatives in Washington state have faced a significant impasse due to a persistent chicken-and-egg dilemma. This predicament revolves around the question of how to proceed, hindering any advancements in this area.

Recently, legislators enacted a bill, aiming to initiate preliminary actions towards implementing a program. This bill proposed the voluntary collection of motorists' odometer readings. However, Governor Jay Inslee, a member of the Democratic party, exercised his veto power and rejected the measure. His rationale behind this decision was rooted in the belief that Washington must have an established program before gathering personal data from its citizens.

Undoubtedly, this situation has created a deadlock, leaving road usage charging efforts at a standstill.

The Director of the National Transporation Finance Center's Thoughts

Asha Weinstein Agrawal, the director of the National Transportation Finance Center at the Mineta Transportation Institute of San Jose State University, emphasized that states are faced with the complex task of addressing both the social and environmental ramifications associated with their strategies for replacing the gas tax proceeds.

So will there really be additional taxes or hour taxes? 

Over the years, the institute has consistently conducted nationwide surveys since 2010, which have revealed an increasing inclination towards endorsing mileage-based fees, implementing preferential rates for low-income drivers, and incorporating special rates based on the level of pollution emitted by vehicles.

Weinstein Agrawal asserts that the prevalent state of public policy and transportation funding inadequately aligns with the escalating priority placed by states on mitigating carbon emissions as a means to address the challenges posed by climate change.

She expressed concern over the notion of transitioning towards a framework that favors cost-effectiveness in driving gas-guzzling vehicles while imposing higher costs for driving a Prius. This approach appears to present significant symbolic challenges and, quite literally, sends counterproductive economic incentives and motivations to individuals. Technology innovations are also a factor and have a fair share of impact.

According to Evan Burroughs, his 85-year-old father, Hank, skillfully sidesteps substantial vehicle registration fees through his active involvement in Oregon's program, leveraging the advantages of his electric car. Conversely, Burroughs himself, as an owner of a Subaru Outback, conscientiously contributes an additional negligible amount to his monthly expenses.

"In my perspective, such engagement in the experiment holds significant value, as it empowers me with the knowledge that I am dutifully contributing my equitable portion towards the development and maintenance of infrastructure."

In Conclusion: Moving towards mileage-based charges in a changing landscape.

In light of the declining revenue from fuel taxes, many states are considering implementing mileage-based charges as a more sustainable alternative. The traditional fuel tax system has been the primary source of funding for road repairs and infrastructure maintenance. However, with the rise of electric vehicles and increased fuel efficiency, fuel tax revenues have plummeted significantly.

Mileage-based charges offer a way to ensure that all road users contribute fairly towards maintaining transportation infrastructure. By charging drivers based on the number of miles they travel, rather than relying solely on fuel taxes, states can generate a more consistent stream of revenue. This approach also takes into account the growing presence of electric vehicles that do not require gasoline and therefore do not contribute to fuel tax revenue.

While implementing mileage-based charges presents its own set of challenges - such as privacy concerns and technological requirements - it may be the most viable solution in an evolving landscape where traditional fuel taxes are becoming increasingly obsolete. Imagine multistate trips with this program architecture. 

Furthermore, this shift towards mileage-based charges could encourage people to opt for more environmental implications and friendly modes of transportation or choose shorter routes, ultimately helping to reduce congestion and carbon emissions.

As states continue to explore this option, it is crucial to strike a balance between sustainability and affordability for all road users in order to effectively navigate this changing transportation landscape. Valuable lessons will come along the process. Either on a voluntary basis or through a mandatory program, it should make the public comfortable.

Overall, with the decline in fuel tax revenues posing significant challenges for maintaining transportation infrastructure, adopting mileage-based charges appears as a promising solution that can adapt to an ever-evolving landscape driven by technological advancements and shifting consumer preferences.

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