Wireless: Oregon Road Tax Pilot Tests Alternative to Gas Tax

By Edward Cone  |  Posted 04-24-2006

With gasoline prices high and likely to stay that way, fuel efficiency is chic again for the first time since the heyday of disco. But the trend toward hybrid cars and other abstemious vehicles poses a problem for states that derive much of their road maintenance and construction budgets from gas taxes. Lower gas consumption means less tax revenue, and the high prices at the pump also make increasing the per-gallon tax rate politically unfeasible.

What's a revenue-hungry state to do? Charge by the mile instead of the gallon.

In Oregon, one solution now being tested by the Department of Transportation's Office of Innovative Partnerships and Alternative Funding is a mileage-monitoring system that would tax drivers by the distance they travel on state roads, rather than by the amount of fuel they consume. Using global-positioning satellites and wireless technology, the Oregon Road User Fee Pilot Project tracks vehicles in transit and then captures their mileage data when they stop to refuel; an onsite computer at gas stations calculates the distance tax and adds it to their fuel bill, deducting the state gas tax at the same time.

The tax rate for the test is 1.2 cents per mile; the goal is to achieve rough revenue parity with the amount generated by Oregon's gas tax, which is currently 24 cents per gallon and which accounted for 86 percent of funds used for road construction, maintenance, and repair in 2004. Worse, Oregon's gas tax has not kept pace with inflation in recent years, say state officials, and voters show little inclination to raise it.

Oregon started its test program in late March, and project manager Jim Whitty says broad implementation could begin soon if the trial run goes well. "We designed it so that it's ready to go if the pilot is successful," he says. The version being tested uses off-the-shelf GPS technology and simple connections to the electronic odometers common in newer cars. Oregon is spending about $3 million on the project, paid for with state and federal funds.

The system, which Whitty says would cost about $33 million to implement at Oregon's approximately 2,000 gas stations, would be applied only to new cars, which will increasingly have GPS receivers as standard equipment. It could charge different rates for travel in particular areas, or at certain times of day, in order to give drivers an incentive to avoid rush hours or high-maintenance roads. And the satellite tracking will count in-state mileage only, so that drivers won't be taxed for trips on roads the taxes don't support. "The borders of the state are determined by the GPS, so you don't have to build anything extra to make it work," says Whitty.

There is an undeniable Big Brotherish aspect to having the government count your mileage, but Whitty is well-practiced at answering the questions that inevitably arise when people first hear about the plan. For instance, the system does not track where a driver goes, just how far he or she has traveled. "It's not where they've been, but the number of miles in each zone," Whitty says. Since no location information is gathered, there is no threat to privacy, and because the radio transmitter that sends data from a car's electronic odometer to the receiver on a gas pump has a range of only a few feet, poaching of driver information is unlikely.

Still, admits Whitty, "People don't believe at first that it doesn't collect information on where you have been, that it doesn't follow you around. It's a hurdle, but people have grown more comfortable with it over time." He compares it to the EZ Pass toll system common in the northeastern U.S., which once aroused privacy fears but is now seen by millions of drivers as a commonplace convenience.

But in a world in which even President George Bush says the country is addicted to oil, isn't there a virtue in creating taxes that favor gas conservation? "People think the purpose of the gas tax is to advantage fuel-efficient vehicles, but it's meant to maintain the road system. It's not doing that. If you want the tax to accomplish other goals, you can do that, but it's purpose is to maintain the roads," says Whitty. "The per-mile tax rate is flat in the pilot for reasons of convenience, and people assume it would be in practice, but that's not necessarily so. What the eventual tax rate is will be a legislative issue. But it will be a huge battle, to decide, for instance, if it should be higher for an SUV."

A program similar to the Oregon mileage metering plan could be coming soon to a state near you. "It will happen somewhere," Whitty says. "Other states are all watching us, I've talked to dozens of them, and we've presented at national conferences. As the move toward fuel-efficient vehicles destroys funding for roads, or increased demand creates huge increases in gas prices, someone is going to reach the point of desperation on their gas tax and decide to use it."