The Era of Pay-Per-Mile Driving Has Begun

Oregon just reinvented the gas tax.

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In 1919, Oregon became the first state to implement a gas tax — a penny a gallon fee that was supposed to pay for new roads and maintain the muddy ones that already existed. Now it's the first state to (at least kind of) say goodbye to it.

This weekend the Oregon legislature passed a bill to replace the state's gas tax program with a "pay per-mile road usage charge" often known as a vehicle-miles traveled (or VMT) tax. Drivers who make the switch will pay 1.5 cents for every mile they drive instead of 30 cents per gallon at the pump. The extent of the current law in greatly limited — participation will be voluntary and capped at 5,000 drivers — but its potential as a model for the country is not.

The gas tax has been losing its purchasing power for years, partly to the rise of fuel-efficient cars and partly to simple inflation. The federal gas tax is projected to fail in 2015, and state failures are just as imminent. In Oregon, as elsewhere, cities bear most of the responsibility for road maintenance, as urban VMT figures are rising relative to rural ones (via the Oregon Office of Economic Analysis):

Despite this dire situation, lawmakers have been hesitant to overhaul the gas tax program for several reasons — from political fears of raising taxes to the easy management of a fuel surcharge to privacy concerns about government tracking personal driving mileage. What should make Oregon's rise toward a VMT model so instructive for other states is how officials dealt with each of those problems in an open and gradual way.

The state has been preparing the public for a per-mile road charge since back in 2007, when it completed a pilot program that demonstrated the viability of a VMT tax. The pilot had the dual effect of encouraging public support, with 9 in 10 participants liking the switch. Another pilot, which wrapped up earlier this year, tested five mileage reporting methods, from smartphone tracking to a simple odometer, to address the fears of Big Brother.

This model of testing and transparency is exactly the approach that experts have recommended to overcome the public's perception problem toward road pricing. First officials must demonstrate the effectiveness of these programs through a pilot, then they must inform people how the new systems will work. That's the winning formula, and wittingly or not, that's the one Oregon followed.

That doesn't mean criticism of a per-mile fee system will disappear. A common complaint — echoed by at least one state representative after the recent vote — is that a VMT tax removes a person's incentive to buy an electric or hybrid car. It's true that these drivers lose some of their cost advantage in a VMT system, but you buy a Leaf or a Prius to save on gas costs in general, not tiny gas taxes in particular, and of course to be environmentally conscious.

Besides, one can even argue that a VMT system might reduce auto-dependency by keeping people aware of their driving costs — just as they're aware, through monthly bills, of their other utility expenses. Additionally, an advanced VMT tax is even capable of controlling congestion on certain roads by varying the fee. And as long as some of the money goes toward enhancing public transit in low-income corridors, there's no reason a VMT program can't be equitable.

To repeat, the nature of the current law makes Oregon's per-mile program a modest milestone. But it's a milestone nonetheless, just like that penny gas tax back in 1919, and now as then should serve as a guide for the rest of the country to follow.

Top image: cozyta /Shutterstock.com

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