In May 2011, there was news of a possible driving tax being considered by the government. The idea was to collect taxes from drivers in a different way than currently collected through the fuel tax. Nothing set in stone as legislation has not even been created for the the possible tax, but many car owners are likely wondering whether a driving tax would be better for drivers and the government than the current fuel tax.
Current Fuel Taxes Pay for Roadways
When you fuel up at the pump every few days, you may not know that in addition to paying the gas station to add fuel to your car, you are also paying money to the government.
The cut the government takes is known as the fuel tax and is currently set at 18.4 cents per gallon. There is also a fuel tax imposed on drivers in each state. As of May 2011, the average fuel tax by state is 20.6 cents on per gallon. However, the amount taxed ranges 4.0 cents (Florida) to 37.5 cents (Washington).
So what is this fuel tax for? It is used by the government to fund projects like building and maintaining highways along with other sources of funding like toll roads, general fund receipts, municipal bonds and designated property and other taxes.
What’s interesting is that according to the Federal Highway Administration, 93.5 percent of the contributions to the construction and maintenance of highways and roadways came from motor vehicle and fuel taxes in 2007. This means the federal government relies heavily on this tax to pay for maintenance.
Currently, the government is said to collect roughly $35 billion a year at the pump, but federal lawmakers in particular say this amount isn’t enough largely because the national rate has remained the same for almost 20 years–and many drivers are switching to fuel efficient cars and don’t need as much gas.
It’s for this reason that lawmakers have considered switching from the fuel tax to a driving tax.
What Is a Driving Tax and How Would It Be Different?
In order to earn more money for the roads, the government has tossed around the idea of issuing a driving tax. It would differ from the motor fuel tax in that it would charge drivers based on the vehicle miles travel instead of gas purchased.
One way lawmakers propose to do this is by having drivers pay the tax by mail after they’ve received an electronic reading of their vehicle’s odometer at the gas station.
Another option is to have drivers tabulate miles driven by using an on-board GPS system. In this case, motorists could be charged for miles driven, roads traveled and even the time of day traveled.
So far, there are two problems with the ideas already presented: One, calculating miles driven could be deemed too intrusive. Two, experts expect the driving tax to be more expensive. CNN Money recently estimated the driving tax could cost two to three cents per mile, whereas the fuel tax costs under a penny per mile. This is just on the federal level. What could happen when driving tax by state is incorporated? The costs could definitely skyrocket.
These reasons contributed greatly to the prompt rejection by the Obama administration of this tax in 2009. However, while this is likely not to be a welcomed concept for those who are already struggling to pay for gas, it is not completely far-fetched.
In 2001, the Oregon State Legislature authorized the creation of the Road User Fee Task Force because it was facing the same issues. According to Oregon.gov, this task force was developed to “examine various revenue raising alternatives for replacing Oregon’s gas tax as the primary source of revenues for repairing, maintaining, and building Oregon’s roads.”
The state pushed for a new program because:
- The gas tax hadn’t kept up with inflation.
- Voters continuously opposed increases in the state’s gas tax.
- The fuel efficiency of new vehicles, especially hybrids and other alternative-fuel vehicles, resulted in less gas tax paid.
To fix the issue, the state came up with a mileage-based tax that charged a fee based on actual miles traveled in Oregon. However, as a pilot program, which started in 2006, it only lasted one year. Currently, the state is deciding whether to stick with this option, and if so, whether to charge based on fuel efficiency, avoiding rush hour zones or other factors.
Use Driving Tax or Raise Current Fuel Tax?
Since the fuel tax we pay at the pump is set at a rate that hasn’t been changed since 1993, some that the government should simply increase it to meet maintenance needs.
However, the issue actually runs deeper. There are a lot of adjustments that have occurred in the auto industry that affect the effectiveness of the current tax.
Because the fuel tax relies on the assumption that it’s possible to estimate the amount of wear and tear your car will create on the roads based on how much gas you purchase, the tax for some cars will no longer reflect appropriate wear and tear.
As noted in Oregon’s pilot program, hybrid cars that get 44 miles per gallon would need much less gas than the same car in its standard model that gets 29 miles per gallon. Yet, both cars are likely to cause the same amount of wear and tear on the roads.
In addition to already issuing these vehicles an alternative fuel tax credit, it would be very difficult for the government to earn enough money from this tax to make the necessary repairs to roadways.
With the driving tax accounting for miles driven instead of gas burned, it could be a more accurate reflection of the wear and tear placed on roadways. But of course, with the issue of privacy coming into play along with displeasure that the oil and gas industry survived an effort to repeal $21 billion tax breaks over the next 10 years–and state gas tax breaks for drivers could be eliminated–some may still be against this type of tax.
Earlier this year, Senate Budget Committee Chairman Kent Conrad asked the Congressional Budget Office (CBO) to study the idea. In March, the CBO reported that a tax was feasible and actually more advantageous than the gas tax.
However, the tax is still reportedly not supported by Obama and therefore, is still considered to be no more than just an idea.
CUT EXPENSES, CUT EXPENSES, CUT EXPENSES, CUT EXPENSES
the taxpayers of this country are tired of the government trying to raise out taxes when we know that most, it not all the money will go to raise government employee pay or benefits that are already better than the average taxpayer.
Implementing a Driving Tax is actually fairly simple. Most of the needed procedures are already in place. All vehicles are inspected each year and the mileage is recorded. When a vehicle is inspected, take the current mileage, access the mileage from the last inspection, subtract and apply tax on the resulting mileage. The DMV would have to be able to supply the previous mileage to the Inspection Station.
Our road infrastructure is deteriorating and more revenue is needed as long as its spent on the roads.