Oregon drivers volunteer to test per-mile tax as revenues tail off

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WASHINGTON — The potholes convinced real estate broker Lester Friedman that there had to be a better way to pay for road construction and repairs.

Friedman, who lives in Bend, Ore., drives about 8,000 miles a year in his 1999 Chevrolet Suburban, ferrying clients throughout Central Oregon. He sees roads in various states and he can tell you firsthand that the current arrangement just isn’t working.

That’s why he volunteered to test a new state program that would levy a tax on miles driven, rather than on each gallon of fuel purchased. In every other state, and at the federal level, gasoline taxes are levied on a per-gallon basis.

Friedman’s view is only anecdotal, but state officials across the country know the current per-gallon gasoline is outdated and increasingly insufficient. It is raising less revenue as cars become more fuel-efficient — or electric — and more people turn to public transportation. Meanwhile, crumbling infrastructure is increasing the need. Faced with these facts, many states are looking for alternatives to the gas tax.

California is considering a plan like Oregon’s. Virginia tried another route last year, eliminating the state’s 17.5 cents per gallon motor vehicle tax on gasoline and diesel and replacing it with a 3.5 percent tax on the wholesale price of gasoline and a 6.0 percent tax on the wholesale price of diesel. In addition, the state dedicated a portion of the general sales tax to the highway fund. And Missouri put a multibillion-dollar sales tax hike for transportation on the ballot this month, but voters soundly rejected it.

“In most places, (the gas tax) is not keeping up with inflation because it’s a per-gallon tax and it’s not indexed,” said Norton Francis, senior research associate at the Tax Policy Center, a progressive think tank. “The revenue is not keeping up, and the road construction and other project needs are growing.”

Only a Florida, Maryland and Massachusetts index gas taxes for inflation. According to the conservative Institute on Taxation and Economic Policy, most state gas taxes, especially those not indexed, are “built to fail.”

After adjusting to account for growth in construction costs, the average state’s gas tax rate has effectively fallen by 20 percent, or 6.8 cents per gallon, since the last time it was increased. Among the 36 states levying only a fixed-rate tax, effective gas tax rates have plummeted by 29 percent, or 9.5 cents per gallon since they were last increased, according to the 2011 study.

Since the federal gas tax was last increased — to 18.4 cents per gallon — in 1993, inflation has eroded its value by 40 percent, according to Ben Husch of the National Conference of State Legislatures. States that tax by the gallon have fared no better, leading many to look at models like Oregon’s.

Last week, President Barack Obama signed a bill transferring $11 billion into the federal Highway Trust Fund — a temporary fix to prevent the fund from going dry. Enactment of this legislation prevented the U.S. Department of Transportation from having to implement its cash management plan, which would have delayed reimbursement payments to state departments of transportation, according to the National Association of State Budget Officers.

State’s experiment

In Oregon, a pilot program will test the “mileage-driven tax,” which eventually could replace the state’s per-gallon gas tax.

Private contractors are bidding to devise a way to calculate mileage. Several consultants will be selected and each could have a different method, said James Whitty, manager of the Oregon Office of Innovative Partnerships and Alternative Funding. The state is starting to sign up volunteers for the program, including Friedman, with the goal of getting 5,000 testers in place by next spring to try a variety of mileage calculation methods.

Another volunteer, Michelle Giguere of Portland, said she signed up because it’s important to get data before making a policy decision. Giguere said she doesn’t put many miles on her Jaguar during the week, when she commutes to her job at a law firm. But she racks up large gas bills on the weekends, when she often drives more than 100 miles to recreational areas.

“It’s completely obvious that the gas tax is not sustainable right now to keep our infrastructure funded,” she said. “I’m curious how this is going to work. What Oregon is doing is really smart.”

One way to monitor mileage would be an odometer-like device that simply tracks miles driven. (The motorist would receive a refund for miles driven out of state.) Another could involve GPS monitoring, and others could rely on smartphone apps or a combination of tracking systems.

The proposed tax rate is 1.5 cents per mile, which is the current state gas tax rate of 30 cents per gallon divided by the average car’s 20 miles per gallon. Friedman, with his gas-guzzling Suburban, probably would do better under the mileage tax than the per-gallon tax. Drivers with more-efficient cars might do worse.

Civil liberties groups initially had qualms about the program, but when a method was proposed that did not rely on GPS, their fears were assuaged, said to Becky Straus, legislative director for American Civil Liberties Union of Oregon. Straus also said provisions in the test program that do not allow the information to be used by law enforcement without a probable cause warrant and require the information to be destroyed after a set period of time, also eased concerns.

“There’s quite a lot of trepidation about what’s happening with motor vehicles as far as fuel efficiency goes,” Whitty said. That’s a good thing, to have fuel efficiency, but if a state is heavily depending on the gas tax, if the efficiency goes up, the revenue goes down. Electric vehicles don’t burn any gas. The question is what do you do?”