Brilliant Strategy for Transition to Road User Fees

Everybody in transportation knows that we need to move from a gas tax to a road user fee in order to finance transportation infrastructure. Regular people – that is, everybody else – hate this idea and doesn’t get it. A colleague has come up with what I think is a genius political approach that I describe in the second half of this post. The first half describes the problem.

THE PROBLEM. This is what the public says:

I’m already paying for the roads through my taxes. [Actually, you are paying with 18 year old prices since the fuel tax hasn’t been changed in that long. In the meantime, the costs have increased enormously. And compared to the price and volatility of the gas itself, the taxes are not that significant a percentage. ]

It works great. Why touch it? If the amount of money raised is the problem, just raise the tax. [Well, 1) you can’t just raise the tax, which is why it hasn’t happened in 18 years even though we are experiencing a crisis in our transportation infrastructure which is crumbling and ancient. If you’re lucky enough to do any traveling to Europe, you’ll note that our airports, train stations, trains, roads, and sidewalks are so much worse than what you see there. We are looking like the poor, ragged cousin. And if the fuel tax is broken as a means of raising money, as we move to more fuel efficient vehicles and alternative fuels, it will get increasingly broken.]

Paying by the mile is an unfair and regressive as a tax. What about the miles I drive out of state or on private roads? What about poor people? [Today’s gas tax has all those same problems. Some of the road user fee implementations could correct some of those problems.]

What about my privacy? I don’t want the government to know my every move. [Good point, read this that I wrote earlier]

THE SOLUTION. Here is a strategy that can get political buy-in and offer us a transitional path toward adopting road user fees. I’m thinking it is pretty clever and viable.
Put together a working group of legislators and outside stakeholders to discuss how we pro-actively address the impending transition to electric vehicles. Here is how the logic can proceed:

1. Everyone is willing to agree that EVs should pay their fair share, and that the gas tax system let's them off the hook.

2. It is far better to pro-actively come up with an appropriate solution before there are lots of them. With the tax expectation in place, people can buy EVs with full knowledge, rather than government trying to change the rules after this has become a significant market with a significant constituency.

3. The bill itself should be lightly worded. Owners of electric vehicles need to pay for miles driven within the state according to some referred-to rate plan (which definitely needs to adjust with inflation). The simplest means would be an odometer reading at time of inspection. Other mechanisms that result in the appropriate payment, as approved by the state, would also be allowed.

4. To be fair, any driver/vehicle can choose to opt in to this new method of road user fees, instead of paying gas taxes.

Implications: We have a platform for experimentation on this new payment method, and working it through the entire system with low volumes. We start with the lowest common denominator for payment (odometer reading) that side steps privacy and technology concerns. However, other technology solutions could come online and be approved by the state (payment with GPS using smart phones, or with other in-vehicle devices – those built in to the car or those retrofitted on existing vehicles). Having multiple payment options will ultimately provide consumers with an array of choices that many people will find more appealing. Some solutions will address the privacy issues. Some will be able to track out-of-state versus in-state miles. Just about every other option could be a preferred choice over the crude odometer reading because it will reduce the distance taxed. As time goes on, there would likely be all sorts of methods for payment and collecting of the data that use a wide range of devices, evolve over time, and take the burden of devices and refreshing them away from the state.

That is the gist. I think it is a brilliant strategy that should have few detractors now, gives a slow easy opportunity for working the new payment mechanism through the collections systems, and opens up the path for any kind of vehicle, to opt into the system.

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Is the gas tax a user fee?

Here is my answer for the National Journal Transportation Blog.

"User pays" was the foundational concept and an interesting one to reflect on. The question notes that current gas taxes inadequately cover even simple maintenance requirements on existing roads, yet the phrase resonates strongly with drivers. They sincerely believe that they have paid for all that is required with their gas taxes at the pump.

If the road user really paid what driving costs to maintain, what driving costs to widen and build new, what driving costs in police forces, emergency personnel and equipment, lifetime effects of accident road deaths and injuries, watershed destruction, groundwater and run-off pollution, excess asthma rates, higher incidence of heart disease and negative effects for those living near highways, congestion, and CO2 emissions (etc, my list is truncated), we wouldn't be in the unfunded situation we are in today.

Also, if "user pays" included all those "externalities" (so many things in quotes), it would seem perfectly appropriate for the gas tax to include pedestrian and sidewalk improvements, mass transit, electric charging stations, and environmental remediation efforts because all of those things are attempts to mitigate the real and costly negative impacts caused by the car-driving users.

At the end of the day, if we take political realities into account, the one thing I ask for is for drivers to truly understand what their fuel tax is actually paying for, and what is quietly and covertly being subsidized by their other taxes. Because we haven't included these costs in the gas tax, we are using local, state, and government money brought in from other sources to cover the difference. When we say we don't have enough money for education, or welfare, or parks, or elderly programs, we need to recognize that this shortfall is in part because we are paying for all sorts unfunded car-related expenses with non-gas-tax dollars.

To read how other experts weigh in on this, go to the National Journal Transportation Blog.

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Radio Spectrum & the Internet Story made simple

Here is a brilliantly written article, that explains in clear language using powerful metaphors, exactly what makes the internet, openness, and wireless communications so beautiful, so powerful, and so filled with potential. If you are remotely interested in these topics, you should read it – just a couple of pages published in Salon.

Dare I give some highlights? giving you an out from reading the whole piece? They are better in context:

“Here Reed is dogmatically undogmatic: "Attempting to decide what is the best architecture before using it always fails. Always.”…If you want to maximize the utility of a network,… you should move as many services as feasible out of the network itself.”

This is the opportunity we have before us in thinking about how we build out the smart grid, and road user fees. Both huge and ubiquitous wireless networks that will roll out across the US over the next decade.

“Reed and his colleagues argued, keep the network unoptimized for specific services so that it's optimized for enabling innovation by the network's users (the "ends").
That deep architectural principle is at the core of the Internet's value: Anyone with a good idea can implement a service and offer it over the network instead of having to propose it to the "owners" of the network and waiting for them to implement it. If the phone network were like the Internet, we wouldn't have had to wait 10 years to get caller I.D.; it would have been put together in one morning, implemented in the afternoon, and braced for competitive offerings by dinnertime.”

Ok, did I neglect to mention that this article is 6 years old? And that it was written by two friends of mine? No matter. It is a must read. Here is the link again. Hey, I only read it the first time myself this morning.

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Why a Road User Tax is Fabulous for the Economy

The National Infrastructure Financing Commission just released its report today (OK, I know that sounds boring, but it is an important report for transportation people, and for people who use transportation), recommending that we move from the gas tax to a "vehicle-miles-traveled" tax.

You could read the report, or read my vastly more entertaining and much much shorter post on this topic at the Huffington Post here.

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Every day is already a gas tax holiday

The cost of gas has tripled in the last few years, Goldman Sachs is predicting oil at $200 a barrel, and the economist Paul Krugman makes the case for why this isn’t a speculative bubble. Given that reality, what’s a country to do?

Subsidize?

Both Hillary Clinton and John McCain’s recommendations for a gas tax holiday this summer begin us down this road. As it stands now, we are already experiencing a gas tax holiday, every day of the year. Our gas taxes have 42% less buying power today than when established in 1993, which is why our road infrastructure is in such sorry state of disrepair. Imagine trying to keep your own life in good working order with 42% less buying power.

And indeed, filling up the gas tank is taking a significant bite out of the average family’s household budget, and is forcing difficult choices among those with the lowest incomes.

Is subsidizing the answer? It might be, for some very small slice of Americans. Which doesn’t mean it should be for all Americans.

Indonesia gives us an example of what this path holds. That country has been subsidizing gas for its population for years, initially certainly with good intentions of helping ease the cost of a perceived necessity. This year, Indonesia anticipates that these subsidies – 40% of the real cost of fuel -- will eat up 13% of its federal budget, more than it spends on education and health care. When the government reduced these subsidies in 2005, riots ensued. Yet projections around gas prices are forcing the Indonesian government to sensibly reduce is subsidization a seond time. It is expected to announce another reduction in the subsidy shortly, resulting in an immediate 25-30% increase in gas prices.

I think we would all agree that an overnight 25% increase in fuel prices is going to be a real shock to their economy. But it is the right thing to do. Better yet is to never start down this path. It isn't helpful, not in the short run, nor in the long-run. More on that in the next post.

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Should Casinos Subsidize Car Travel?

The Governor of Massachusetts has asked state legislators to seriously consider encouraging the building of several new large casinos in the state in order to raise revenues, the majority of which will be used for transportation shortfalls. I'm thinking there is another way to solve this financial crisis that guarantees a triple win. Ding, ding, ding!!!! Let's be winners!

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