New Tax? Drive More Miles, Pay More Money

Feb. 26, 2009— -- The federal government and a dozen states around the country are considering taxing residents on how many miles they drive.

It would be a radical shift away from a system in which motorists are taxed by state and federal governments for each gallon of gas they buy. That money is then used to maintain the roads and bridges everyone uses on a daily basis.

The problem is that today's cars are more fuel-efficient than those in the past. These vehicles take up the same space on highways and beat up roads just as much as yesterday's gas guzzlers, but don't generate as much in taxes because they use less fuel.

But switching our taxation system is no easy task.

A commission created by Congress to study transportation financing released a report this morning in Washington offering recommendations on how to pay for highways, besides the gas tax. A mileage-based fee was one of the top solutions.

"The most viable approach to efficiently fund federal investment in surface transportation in the medium to long run will be a user charge system based more directly on miles driven (and potentially on factors such as time of day, type of road, and vehicle weight and fuel economy) rather than indirectly on fuel consumed," the report said.

Public reaction to such taxes so far has been lukewarm, at best, and downright nasty, at worst. Government officials who have mentioned the idea have generally backed down.

"It's invasive and it's got to be unconstitutional. It's just wrong in so many ways," said Janice Scarpitti, a Rhode Island resident upset about a now-dropped proposal in her state. "How much can they charge us for driving?"

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Scarpitti is a home health care nurse and drives 300 to 400 miles a week. Her employer doesn't reimburse her for mileage. She said the government should focus on taxing discretionary items such as cigarettes and alcohol.

"Gasoline is a necessity. I don't have a choice about gas. You have to pay for it and you have to drive," she said. "I would have to tell somebody in the government how many miles I put on my car. That's not their business. This is still the United State of America and I wouldn't allow it.

"If they allow that, they will find a way to tax the air you breathe," Scarpitti added. "You have to stop the nonsense."

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U.S. Transportation Secretary Ray LaHood floated the idea last week as one of several ways that the government could pay for highway building and maintenance.

"We all ought to be thinking outside the box about how we're going to fund roads, bridges, infrastructure beyond the stimulus," LaHood told reporters Friday.

The White House couldn't back away from the comment fast enough.

"It is not and will not be the policy of the Obama administration," press secretary Robert Gibbs said, adding, "It's a no-go."

Still more and more cash-strapped states are at least putting the option out there for discussion as they embark on their long-term transit planning.

Fuel Taxes Rising Too Slowly

At least 10 states have mentioned a vehicle-mile-traveled, or VMT, tax in planning documents, according to Jim Reed, transportation program director for the National Conference of State Legislatures. Another six have discussed it in some way or another, Reed said.

"It's still a pretty new idea," Reed said. "It's catching on nationally because we do have this shortage of funding in the gas tax."

In September, the federal government had to pump $8 billion into the Highway Trust Fund because of a shortfall created by declining gas tax revenues.

The issue is likely to hit center stage this summer when the 6-year-old legislation dealing with the highway fund and the 18.4-cent a gallon gasoline tax comes up for reauthorization. (States charge about 20 cents extra for each gallon of gas purchased.)

Robert Puentes, a senior fellow studying transportation at the Brookings Institute, said that Americans are driving less, using more fuel-efficient cars and that gasoline taxes haven't been raised fast enough. At the same time, the demand for additional highway spending has never been higher.

"So it's a real perfect storm when it comes to transportation funding," Puentes said.

The country is heavily dependent on the fuel tax, Puentes said, and a vehicle-mile-traveled fee "is exactly the type of solution we should be talking about.

"Gasoline being consumed is less. That on the surface is not a bad thing. We've been talking about energy dependence for years and years and years and here we're finally starting to make inroads." he said. "But it has this dramatic impact on transportation funding."

But even the most vocal advocates acknowledge that vehicle-miles-traveled fees could be a decade away from reality.

For now, Oregon is the leader.

State Sen. Bruce Starr, a Republican who then headed a House transportation committee, drove a fuel-cell concept car that Ford was showing off in 2001.

"It got me thinking: 'Wow, this is interesting,'" Starr said. "How are we are going to pay for roads, bridges when people are driving in vehicles that aren't using gasoline?"

So, he formed a committee to study the issue, and one of its suggestions was replacing the gas tax with one based on how much motorists drive.

In April 2006, the state launched a 12-month pilot program after getting 299 drivers to volunteer. Each car was given a special transmitter that tracked how many miles were driven within Oregon, and at what times.

Cars Would Need Expensive Transponders

Every time the drivers filled up at two of the participating gas stations, the device would automatically calculate how many miles they drove. Instead of being charged Oregon's 24-cents-a-gallon gas tax, the motorists were charged 1.2 cents for each mile driven.

"Ultimately, you pay for the mileage that you drive," Starr said. "We made it really clear that our pilot was revenue-neutral. We didn't want to raise more taxes from Oregon drivers but just to test the concept."

At the end of the pilot, 91 percent of the volunteers said they would agree to continue paying the mileage fee in lieu of the gas tax if the program were extended statewide.

The catch for Oregon: Retrofitting the vehicles with the devices was extremely costly. Starr said that if a vehicle-miles-traveled tax is ever permanently implemented, the automakers would have to be required to install the transponders in all new cars.

"It's something that needs to be addressed at the federal level," Starr said. "It really makes very little sense for one state on its own to implement a VMT."

Oregon charged all the volunteers the same 1.2 cents for each mile driven, although the rate could be adjusted as necessary. The technology could be used to charge motorists more for driving during rush hour or less for off-hours. Certain zones could also be deemed congestion areas and higher fees could be assessed.

So, states could actually tax people more for driving through city centers during their morning commute than a farmer on a rural road at midnight. States could also charge higher rates to SUVs and lower rates to hybrids if they wanted to encourage the use of more fuel-efficient vehicles. Such tracking has drawn concerns from privacy advocates, although VMT supporters say such issues can be resolved.

Other States Look at Tax

In Massachusetts, Gov. Deval Patrick, a Democrat, recently proposed a voluntary pilot program for his state, similar to Oregon's. The legislation is still pending. In Colorado, there is also a bill that would create a similar VMT pilot program.

In some states, residents and businesses have vehemently objected to such proposals.

A survey of Idaho small-business owners by the National Federation of Independent Business' local chapter found that 80 percent of its members opposed to a VMT plan floated by Gov. C.L. "Butch" Otter, a Republican.

And, in Rhode Island, Republican Gov. Donald L. Carcieri quickly distanced himself from a "Blue Ribbon" transportation funding panel he created after it suggested a miles-driven tax as one of several options.

"There are no plans to move forward with that at all," Cariceri spokeswoman Amy Kempe told ABC News. "He's not considering it at this time.

"They had to look at all funding streams and all funding opportunities. They did a little outside-the-box thinking and that's all well and good … but the governor has already said that's one he doesn't want to move forward with."

ABC News' Lisa Stark contributed to this story.