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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Open Platforms, Smart transportation & smart grid

Nice Treehugger podcast interview with me that explains my vision on the how and why of open platforms for cars, the connection to the smart grid, and how creating a mobile internet can become an engine for economic development. Phew, all that in 15 (?) minutes.

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Protecting location privacy of drivers

As background to this one. you might want to read the more general article we just wrote for the Huffington Post on why we call for a national dialogue about (and promise for) location privacy. Below are some specific ways we might technically provide location privacy in for cars.

We start with what we consider to be the gold standard:

A privacy-preserving taxing protocol should reveal the minimum possible amount of information needed to achieve the policy goal, in this case the amount of tax owed.

Most current systems (e.g., E-ZPass) operate on the "trust us" model:
the government promises to properly respect the security of the driver, but collects potentially invasive information. But we all know, there just aren’t any “trusted third parties” that can be trusted forever. And we don’t need to rely on them.

For some kinds of applications, simply having a tamper-resistant device in the car that calculates the tolls and reports only the amount owed would suffice. Such a device could be auditable (so that drivers could know that the device is not secretly delivering information about their position) and equipped with a self-destruct feature (to erase location information) so that the driver could hide her information if necessary (perhaps at a cost of paying an excessive "default toll").

But wouldn't it be great if the tolling and traffic software could run on any smartphone? For this kind of setup, there are more sophisticated solutions available. One of the truly amazing aspects of modern cryptography is that it makes it possible to design protocols for mutually untrusting parties to act as if there is a trusted third-party mediating, without actually requiring such a third-party. For instance, electronic cash allows people to pay bills anonymously and untraceably, but in a way that assures merchants that they are actually getting paid (it's hard to forge). Anonymous credential systems allow individuals to prove that they are authorized to access certain data or enter particular areas without revealing their identity. We need to demand that these sorts of protections are required and part of any future road pricing systems.

Cryptographic protocols can be designed to allow the government to collect taxes, detect infractions, and record aggregate traffic statistics without violating the privacy of drivers. For a more comprehensive discussion of such solutions, see here. The big contractors likely to be involved in designing and implementing the road pricing systems (e.g., IBM and Siemens) have on staff some of the finest cryptographers in the world. Requiring such protections would pose no substantial obstacle to the technical adoption of a mileage-based system.

This post was co-authored by Andrew Blumberg.

Photo by Gerlos.

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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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Add 40% more cars and...pray

Today, Tata Motors unveiled the cheapest car in the world: the Tata Nano, priced at $2,500 and in dealerships by year end. It is touted as the People’s Car, and opens up the option of personal car mobility for a huge new population segment. It was unveiled to the theme music of “2001: a Space Odyssey.”



And what does this future hold? An environmental and urban disaster.


The new Nano will add enormously to the numbers of underpriced and therefore overconsumed cars on our planet. The price of the Nano, to individuals and to society, is a heck of a lot more than $2500.

We can think of the cost of a car has having three components (and yes, for those life cycle sticklers, I'm simplifying by ignoring the horrors associated with manufacturing and disposal for this post):

THE CAR: purchase, depreciation, maintenance. In the US, that is about $8k a year. While I imagine maintenance to be significantly cheaper in India than here, I am sure it will be the same unanticipated and underappreciated cost it is here. Americans currently spend 18 percent of their household budgets on their cars, how sad it is to contemplate the effects of that percent of income being taken out of the wages of low-income Indians. And because of the size of these unplanned for maintenance needs, I can also easily imagine that many of these cars will end up very poorly maintained, much like the ubiquitous auto rickshaws that flood Asian cities and are some of the dirtiest vehicles around.

CAR STORAGE: People typically park their cars for “free,” even in dense urban areas where the value of street and sidewalk space is high. This free is dramatically undervalued to the other users of this public space. Just as we saw beautiful squares in European villages being turned into parking lots, and acres and acres of land in American suburbia being paved to accommodate the one peak day a year at the mall, so too we can anticipate that every single possible space in Indian cities, in Indian poor neighborhoods, in Indian village squares, on what few sidewalks there were, will soon be filled with beautiful shiny Nanos. I can see the crowded sidewalk clearing for the Nano that pulls in and parks. The driver walks away and the crowd of pedestrians is left with less space. Gone will be places to play, places for markets, places to walk in narrow old neighborhood streets.

CAR DRIVING: Most people think that the cost of driving is just the cost of gas. In the US, this amounts to about 7% of the total costs that we account for and actually do pay. In India, one can imagine that fuel costs will feel like a heavier burden to those driving the Nanos. But the costs of gas are just a very tiny part of the whole. As we have seen from the wave of cities exploring congestion pricing (unfortunately no Indian cities). Congested roads, jammed past capacity already, will become gridlocked. The scooter that has a family of four on it, will be replaced by the safer-for-the-family Nano that occupies four times the amount of space.

What is to be done? Is it fair to deprive lower-income people the opportunity to travel more conveniently and more safely? No. But we need to make every driver pay the real costs of using a car. Those real costs include market prices for storage; road taxes high enough to adequately maintain them once they’ve been built; congestion pricing as appropriate, and carbon taxes on emissions. More details can be found in my other posting on this subject.

Once driving personal cars becomes appropriately priced, we choose to use them == rather than other modes of travel -- when they are the best value for our need.

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Paying for Our Roads

Right now, vehicle transportation infrastructure gets its user-fee financing from a few major sources:

Gas taxes
Road tolls
Residential parking permits
Vehicle registrations

The public belief is that gas taxes pay for road maintenance and road building of everyday roads – despite the fact that gas taxes haven’t been raised in the US since 1991.

The belief is that highway tolls pay for the building and maintenance of highways on which they are charged. Parking permits and registration fees are seen as mechanisms by which taxes are extracted for no good reason.

We can assume that people don’t like taxes. They don’t much like user fees. And they really don’t like what they perceive to be unfair or “double counting.” Nor do they relish falling unexpectedly into rivers, experiencing increasingly extreme weather patterns and brush fires, significant rises in sea level, or extraordinary species loss.

Unfortunately, the reality is that our transportation infrastructure is grossly underfinanced no matter what the public thinks.

We aren’t covering even basic levels of safety and standards for good repair. We don’t have funding for expansion. We don’t charge the real cost of parking. We don’t charge for congestion. We don’t charge for tailpipe emissions. We don’t charge for contributions to global warming. We also don’t charge for a large number of other externalities (adverse health effects; other air pollution, etc.)

A thoughtfully designed user fee system encourages the behaviors we want more of. With adequate revenue sources and drivers paying closer to real costs, better quality transportation alternatives would be both in high demand and fundable! impacting frequency and quality creating a virtuous cycle.

People will choose to drive (and own a car) on a much more rational basis because the costs of driving and owning a car will be overt and highly variable.

• Drive more, pay more.


• Drive less, pay less.


• Drive a fuel efficient car, pay less.


• Drive during off-peak times, pay less.


• Shed the unused car stored on the street, pay less.

We’ll be doing more of our car errands at once; we’ll be sharing rides (GoLoco); we’ll be choosing to walk, bike, take transit when they prove to be cheaper than taking the car.

As we know, words matter. What happens when we adopt a tax and call it “congestion charging”? The public will assume that this tax covers the negative impacts of congestion and that its goal is to reduce congestion (by shifting travel to other time periods and by funding alternatives). If we are truly charging for congestion, then fees should be based on square footage occupied by vehicle (or a simple and effective proxy) and actual congestion on that road (such pricing systems are currently used in HOT lanes in California). In other words, vehicles are charged when the road they travel on is congested, irrespective of precisely what time of day it is, or exactly which geographic line is crossed. [OK, I do understand political necessities, I’m talking about policy here.]

Congestion charging should not be muddled with fuel efficient vehicles (which should not get confused with the word “hybrid”), or take into account the number of people within the vehicle (buses, taxis, and trucks should all pay the same rates based on physical footprint on the road). A congestion charged applied to a full bus and divided among 60 people comes out to a trivial amount, and a car with one person in it on an empty street – even if its 10am on a Tuesday -- should not be paying a congestion charge.

What's with incenting people to choose fuel efficient cars? Or taxing "SUVs" more than others to drive within the congested area? Everything! Fuel efficient cars still take up space and make the highway congested; SUVS should and will pay more than small cars inasmuch as they take up more space. If we start encouraging people to think that congestion taxes address all sorts of things, we will have a real battle when we need to increase fees to address financing needs.

The future holds the following requirements, so let’s plan for them.


Road Pricing. As we move toward fuel-efficient cars and alternative fuel cars, the already inadequate revenue generated under our current system of taxing by the gallon will become even more inadequate. A solar powered car still needs a road to drive on and still generates wear and tear yet wouldn't pass a gas tax. An appropriate way to get at wear and tear is based on vehicle weight. Vehicle weight and vehicle footprint can be generally related to each other, so the same piece of information can be used for both congestion pricing and road pricing. Taxing by the gallon is necessarily on its way out; taxing by the mile is the obvious solution. When we go to road pricing, we have to immediately drop gas taxes. No double counting, we’ll lose the public’s confidence. The system must appear fair and transparent to the public – as long as we don’t muck up the messaging of what our intentions are!

Carbon Tax or Tailpipe Tax. Some time in the near future, we are going to buckle down and address transportation’s contribution to global warming. In the US, transportation produces 33% of CO2 emissions. Our personal cars alone produce 20%. Cap and trade systems might be the right approach for power plants and heavy industry, but they have no effect on the 33% of emissions produced in the transportation sector.

I weary of hearing about hybrids and dual-fuel vehicles as the answer, and deserving of special treatment. We need to be outcome focused, not marketing focused. Cars that actually produce fewer CO2 emissions should get credit (a 5 year old Honda civic gets better mileage than almost every hybrid on the market, and offers close competition to the Prius. Several SUV hybrids get worse mileage than the average car in America today). A simple solution would be to add a per mile carbon tax based on type of car engine; a more complex solution would be to monitor what is actually coming out of the tailpipe. In the immediate term, we'll apply a carbon tax to gas.

So what would this look like in the future? A layering of taxes per distance traveled, with congestion pricing taxes being applied when appropriate.




What might we expect once we have installed in every vehicle the ability to bill per mile traveled?

• Car insurance rates by the mile. Drive less, less risk, pay less


• A portion of car lease payments by the mile. The value of a car is determined by fixed depreciation costs and the number of miles traveled. Leases will have fixed and variable costs.


• On street residential parking and private parking rates by the hour and time of day, as well as weight (proxy for physical footprint taking up curb space). If you park in a neighborhood with high demand for on-street parking, you will be rewarded for getting rid of a car rarely driven, or freeing up that space for daytime business use.

And then what?

People will buy cars based on stickers that tell them what they can expect for road and carbon taxes per mile. Fuel efficient cars, space-efficient, and alternative fuel cars will be in high demand.

No individuals should feel they are unfairly bearing the burden because of their unlucky proximity next to arbitrary congestion pricing boundaries, or easily tolled highways that subsidize others. Poor workers with no good alternatives to driving can receive subsidies directly from their employers; car expenses can be shared through ride sharing; quality alternatives will now be demanded by a larger fraction of the population rather than being relegated to a problem of the poor.

What are the alternatives?
Bridges that fall into the river when cars drive over them. A system where one out of every four or five dollars earned pays for a car with no available options. A mixed up revenue plan that is not outcome focused and in which revenue shortfalls or outcome shortfalls are politically impossible to correct because people believe they have already paid and have already done their part.

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