The neverending debate over taxing gas or taxing miles drones on:
The idea of shifting [from a gas consumption tax] to a by-the-mile tax has been discussed for years, but it now appears to be getting more serious attention. A federal commission, after a two-year study, concluded earlier this year that the road tax was the "best path forward" to keep revenues flowing to highway and transportation projects, and could be an important new tool to help manage traffic and relieve congestion.
The decision by the 15-member National Surface Transportation Infrastructure Financing Commission was unanimous, which surprised Robert Atkinson, the group's chairman. But he said it became clear as the commission's work progressed that a road tax on miles traveled was the best option.
The problem with a mileage tax is it provides no incentive for increased fuel efficiency. That's why two years ago I proposed a Fuel Efficiency Payment that provides incentives for higher fuel efficiency AND fewer miles driven. Here's how I said it would work (make sure you read to the end for the surprise ending)...
Each year, drivers will be required to have their mileage checked at an authorized service facility. Based on the EPA certified city fuel efficiency rating provided by the EPA for the specific type of car, the car owner will pay a fee (call it F) per mile driven. The fee will be equal to the inverse of the EPA fuel efficiency figure.
So consider two car types: a gas guzzler (GG) and a fuel efficient car (FE). Suppose the gas guzzler has an EPA MPG rating of 15 mpg city and the FE car has a rating of 35 mpg city. The per mile fuel efficiency payment for the gas guzzler will be $0.067 per mile drive (1/15) and the per mile fuel efficiency payment for the fuel efficient car will be $0.029 per mile driven. If a driver of each type of car drives 12,000 miles a year, the GG driver will pay an annual fee of $804, and the FE driver will pay an annual fee of $348.
The Fuel Efficiency Payment has a couple of nice features:
1) It places a higher burden on those driving less fuel efficient vehicles--that should satisfy those blaming the SUV drivers for all of the problems*.
2) It places a higher burden on those driving more. By increasing the marginal cost per mile driven, total miles driven should decrease.
3) Assuming fuel efficiency and income are negatively correlated--that is, the rich tend to drive larger, more expensive, less fuel efficient cars--the Fuel Efficiency Payment places a higher burden on higher incomes.
4) It provides an incentive for drivers to switch to more fuel efficient vehicles.
Now that I've hopefully convinced you that a fuel efficiency payment will act as a type of gas guzzler tax that would be less of a burden on lower income drivers, would provide incentives for decreasing miles driven and would encourage a switch to more fuel efficient vehicles, I'd like to point out that the fuel efficiency payment is algebraically identical to a $1/gallon GAS TAX** that many economists, including John and me, think would go a long way toward solving many of the transportation related externalities.
*In the interest of full disclosure, I am a gas guzzling SUV driving suburban commuter. In short, I am the problem. Why you may ask, would I stoop to such low moral standards? Easy, I have 3 kids and a lot of sports equipment. Try fitting 3 kids and a team's softball equipment in the trunk of a Prius. Oh, and the SUV was a great deal.
**Multiplying the FEE=$(1/(miles/gallon)) by miles driven gives $Fee*miles=$1/gallon.