June 22, 2021
If you’ve been following discussions about infrastructure or gas prices, you have likely heard of the growing popularity of the proposed mileage fee. The mileage fee is a replacement for the outdated gas tax to combat our nation’s crumbling infrastructure. Right now, the gas tax funds the Highway Trust Fund, which in turn pays for maintaining roads, bridges, and tunnels. However, this solution simply isn’t working anymore. 65% of major roads in the US are in “less than good” condition, according to the US Department of Transportation. Surprisingly, a significant cause of this change is the rise in popularity of electric vehicles. How can what seems like a positive change lead to a bad result?
There are two reasons why the gas tax can no longer fund infrastructure in the United States.
The first: inflation. The gas tax has not adjusted to match inflation in the last quarter of a century. As a result, the tax is now worth 40% less than it was then. Meanwhile, the population continues to grow, and the roads get more use than ever. Streets experience more wear and tear, but we lack the funds to repair them.
The second reason the gas tax is failing is due to the increase of fuel-efficient and electric vehicles. Electric vehicles, in particular, pay nothing towards the gas tax, but use the same roads and create wear and tear on them. The problem is that electric and fuel-efficient vehicles do not contribute funding in proportion to the deterioration that they inflict on the roads.
The mileage fee is known by many names: Road usage charges, distance-based user fees, vehicle miles traveled tax, or mileage-based user fees. All of these names refer to the same concept. Drivers pay taxes based on how many miles they drive. Some states, such as Hawaii, North Carolina, and California are already testing this on a small scale, and Oregon has a fully functioning road usage charging program called OReGO.
There are many benefits to the mileage tax. The first, naturally, is that drivers will be safer. Infrastructure all over the country is falling into disrepair. Aging roads cause over 22,000 traffic deaths and 38% of injuries, according to the Pacific Institute for Research and Evaluation. This is why experts on the problem and politicians on all sides have been calling for a solution for years. Maintaining roads is a benefit to everyone, and the consequences of not doing so are catastrophic.
Right now, there simply isn’t enough funding, but with the mileage tax, more drivers will be paying into the Highway Trust Fund, and funding road maintenance will be possible. Implementing a nationwide mileage tax would add $340 million into the Highway Trust Fund, according to experts. This money could fund countless improvements to bridges, roads, tunnels, and more. Furthermore, with money being collected based on use, funds will be available based on how much wear and tear each road experiences, meaning busier roads will have more funds for maintenance.
Finally, the mileage tax is simply fairer to drivers. Most drivers will not experience a change, but those who are not currently paying for their road usage will need to contribute their fair share. Electric and fuel-efficient vehicles still inflict wear and tear on the roads, so they must pay the same as everyone else. It is also fair in that drivers who do not use the roads very much do not have to pay very much.
Oregon is currently setting the example for how states would go about implementing the mileage tax on a large scale. Oregon’s road usage charging program, OReGO, uses Azuga Insight, a technology which tracks driver miles and collects revenue automatically. This cuts costs required to the staff otherwise needed to collect funds and track miles. The program is currently optional, and drivers who opt in must meet the following vehicle requirements:
Oregon has incentivized drivers to enroll by removing the state’s increased registration fees, which are based on miles per gallon ratings.
It’s easy for drivers to participate. All they have to do is plug the hardware into their OBD port and set up the digital wallet online. From there, the system automatically tracks how many miles they drive and deducts money from the wallet. Neither the driver nor the state have to manually track anything.
The mileage tax is likely the way of the future when it comes to funding our nation’s infrastructure. It may be a lengthy change, but it is necessary in order to keep our roads safe. To keep up with everything happening in regards to the mileage tax, follow Azuga Insight’s blog for updates. Azuga is leading the movement towards road usage charging in Oregon and many others, and will continue partnering with more states in the future.
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