The New Way to Tax Car Owners: Pay Per Mile Driven

[Dave]

You knew it was going to come sooner or later, if you thought that by buying a hybrid or electric vehicle that it would be cheaper on your pocketbook, don't be surprised when you are taxed for all those miles you drive anyway. Sooner or later state or federal governments were going to figure out a way to recoup that money they were not making from gas taxes and its looking like they are getting it figured out. So yeah, go out and buy that hybrid and electric.... I'll stick with my gas guzzler for now.

Have you ever heard of the vehicle miles traveled tax? No? Well get ready to hear more about it, because the vehicle miles traveled tax, or VMT, is the latest way states are looking to make up for falling gas tax revenues.

"The VMT is likely the way states will raise money in the future for their roads and infrastructure," said Joshua Schank, president and CEO of the ENO Center for Transportation in Washington, D.C. "The states aren't yet to the point where they've figured out exactly how to implement the VMT, but they'll get there."

Even though the VMT is more of an idea than a reality at this point, the fact is states are looking at implementing it as a way to make up for falling gas tax revenues. Those revenues are the primary way states pay for maintaining their roads, highways, bridges and in recent years those budgets have been under pressure.

(Read More: US Auto Sales Expected to Drive Past 15 Million in 2013.)

Why? Blame it on the double whammy of a recession prompting people to drive less, which means they are filling up less often. On top of that, Americans are increasingly driving more fuel efficient vehicles, including hybrids, which means people make fewer trips to the gas station. According to the University of Michigan, the average fuel economy for a new vehicle sold in 2012 was 23.8 MPG, an all-time high.

Taxing Electric Cars

Starting in February the state of Washington will tax electric vehicle owners $100 per year. It's estimated there are a little more than 1,500 electric cars in Washington.

The money raised will go to the state's road maintenance fund. In essence, Washington wants electric car owners to pay $100 for the privilege of driving around the state.

(Read More: Hybrids Are Best Value for Auto Buyers: Report.)

Meanwhile, lawmakers in Oregon are kicking around the idea of taxing high mileage vehicles starting in 2015. The Oregon tax could be a flat annual fee and/or a tax per mile driven.

Either way, what's happening in the Pacific Northwest is raising a number of questions. The primary one being: Is it only a matter of time until anybody owning a car or truck is paying a special tax based on how much they drive their car?

Supporters of VMT or per mile taxes point out that electric car and even hybrid car owners are paying nothing or very little to help maintain state roads.

Take a look at the Washington electric vehicle tax and compare it to the state's current gas tax of 37 cents per gallon. If somebody drives an internal combustion car that gets 30 MPG and they average 12,500 miles driven each year, they'll pay about $154 a year in state gas tax. By comparison, electric car owners will be paying less at just $100 per year.

On the flip side, critics of VMT or per mile taxes say it's hypocritical of state governments to promote electrical vehicle ownership and then turn around and tax those who are the "early adopters".

Tolls, License Fees and the Federal Gas Tax

For years states and some municipalities have been taxing those who drive on certain roads or who cross select bridges with tolls. Many of these tolls were implemented to pay for building or expanding a new highway, with the promise of removing the toll once the road or highway was built. In reality, most toll roads have remained toll roads. Why? States need the funds.

"We are not spending enough to keep up with the maintenance and repairs of roads and bridges," Schank said. "People don't understand paving roads, adding roads, etc. costs money. That money has to come from somewhere."

(Read More: Automakers Rev Up End-of-Year Sales.)

The federal government collects 18.4 cents for every gallon of gas pumped in this country. The federal gas tax has gradually increased from 1 cent a gallon back in 1932 to its current rate of 18.4 cents.

While you may not want to pay any more in federal gas tax, the idea has been advocated in recent years by a growing number of policy makers. In fact, in 2010, the Simpson Bowles deficit-reduction commission called for raising the federal gas tax as a way to help cut the deficit.

Now, Erskine Bowles isn't so sure that idea would fly in Washington.

"I think it (raising the federal gas tax) is generally not well received," Bowles said. "There are lots of reasons not to do it and there are lots of other ways to generate revenues, but what we have to do is make sure that we generate enough revenues to pay for the transportation spending that we are currently undertaking," says

Big Brother Tracking Where You Drive?

As more states look to VMT or per-mile driven taxes, they will wrestle with the tricky issue of calculating how many miles people drive. They could avoid the problem by imposing a flat annual tax on all vehicles when they are registered each year. Critics say that would be unfair to those who drive only 5,000 or 8,000 miles a year while others who are racking up 15,000 or 17,000 miles are paying the same tax.

(Read More: Cheaper Midsize Cars Rated Safer Than Luxury Models.)

There is also the idea of monitoring how many miles are driven using transponders on all cars and trucks. This idea pits benefit of having a more accurate read on the mileage of each vehicle against concerns the state will be able to monitor where you have driven your car. Who would have access to that information? Is that too much of 'big brother' tracking our lives?

There are still more questions than answers when it comes to the VMT, but make no mistake: The idea is gaining steam and coming to a state near you.

http://finance.yahoo.com/news/way-tax-car-owners-pay-164657091.html

[XLFD]

It should be renamed the Vehicle On-road Mileage Incremental Tax (VOMIT) in order to make it even less palatable.  The gas tax has been a good user-fee approach to making users of the roads pay a fair share.  I think the idea behind the VMT is sound in this regard, and yet feel uncomfortable when it comes to figuring out a way of figuring out what people's actual miles approach.  And since most states believe bicycles are vehicles, would they tax them, even if they ride off-road?

 

[Jane]

Well, everyone who uses the roads should pay for road maintenance, that seems fair, but vehicle tracking, oh hell no!

They could use a gadget like in the Progressive insurance commercials where it plugs into the cars data port and sends the mileage to the unit at the end of the year and when you renew your plates take in the mileage tracker(pedometer for car) to the DMV and if it has 15K miles on it your fee is set by that. I still don't like that idea though. It seems like no matter where they go with this short of it being a fee to register the vehicle I would not like it in any way being tracked whether it is how far I drive or where I drive!

[Lisa O'Brien]

Personally I don't like it, what about the people that live in rural areas and have to travel many miles to work? How do they differentiate between paved and gravel/dirt roads?  If they want to charge me for the yearly miles I put on my car to cover road maintenance, then they need to  figure out a way to charge every user: bicyclist, motorcyclist and horse and buggy. Another thought what about people that tow around trailers and boats - they are only going to be charged for road maintenance for the vehicle, I think they should be charged for the trailer.

[Jane]

Good point, more weight on the road is more wear on the road.

[Marty Redman]

How about putting a heavy tax on tires?  This would make the big trucks and trailers have to pay more in the long run.  This would also clear up some of those spare tires in the sheriffs brake room, LMAO.

[Guidothesemipsuedocaptitalistpig]

Isn't it amazing that because this idea of government spying on its own citizens is in the field of environmental well being ..they are willing to toss the same rights they chose to give terrorists not even in our country legally?

They could avoid the problem by imposing a flat annual tax on all vehicles when they are registered each year. Critics say that would be unfair to those who drive only 5,000 or 8,000 miles a year while others who are racking up 15,000 or 17,000 miles are paying the same tax.

Most states impose a large fee ( flat tax) just to renew a drivers credential or tag to begin with why worry now about fairness in who pays what? Unless this really isn't the purpose of the black box on your cars?

[Willy]

VOMIT tax, that's hilarious. We are already being taxed per mile. It's called the gasoline tax. The more you use the more you pay. It's probably one of the fairest taxes we have. The problem is not that we don't pay enough taxes, the problem is where the gasoline tax ends up and how it's used. There should be a surplus of money from gas tax but much of it is not being used to pay for road related issues and ends up in the General Fund.

[AQUAMAN]

Squandering tax monies, then retaxing again to help catch up on the spending abuse elsewhere isn't the key to the root of the problem. Much less people are employed, too many have lost vehicles to poverty, some prefer mass transit, insurance costs also turn off more vehicle buyers/drivers, part-time employees also drive less, some 2 car families have gone to 1 car, scooters/motorcycle sales way up, walking for short trips/exercise, and so much more. This is just the tip of the other realities when you look at the entire picture. Decrease tax burdens at the gas pump, the employers, the entire general public, and you may have a different story. This tired scenario of just asking for more money without going to the real root of the problem is childish, and not making more revenues in the end, just discouraging people even more.