October 29, 2018

Howard A. Learner

6 Reasons Why this Tax is a Crummy Way to Improve Illinois’ Roads and Bridges

The political rhetoric on a possible new vehicle miles traveled (VMT) tax begs the question of whether or not this makes good sense on the merits. It doesn’t.

The VMT tax is not a sound or fair way to fund Illinois’ transportation infrastructure.

Current gas tax revenues are insufficient to meet Illinois’ infrastructure needs. Oil companies, the trucking industry and a few politicians propose raising more revenues by shifting from gas taxes to VMT taxes, which charge drivers based on how many miles they travel. This would require installing a new onboard tracking device in every vehicle, and a new state bureaucracy to calculate taxes owed and assign revenues to appropriate jurisdictions.

If Illinois legislators believe that more funding is needed for infrastructure investments, then raising the gas tax is fairer, simpler and better policy. Twenty-seven states, including Indiana, Iowa and Michigan, have raised or reformed their gas taxes since 2013. Gas and other motor fuel taxes are: easily administered with existing mechanisms; capture revenues from out-of-state drivers who use Illinois roads so they pay their fair share for repairs and improvements, and effectively price carbon pollution while incentivizing cleaner cars that provide air quality improvement benefits for everyone. Here’s why the VMT tax doesn’t work well for Illinois.

First, a state VMT tax is unfair for “crossroads” states, like Illinois, with interstate highways used by millions of out-of-state drivers. Changing to VMT taxes would give a free ride to out-of-state motorists who now pay Illinois gas taxes to maintain the Illinois highways that they use. Why would Illinois policymakers want Illinois drivers to subsidize highway use for out-of-state motorists?

Second, current gas taxes are simple to administer at the pump and can be adjusted using existing mechanisms. The VMT tax would instead require installing new technology in personal cars and a costly new bureaucracy.

Third, the VMT tax would penalize modern new clean hybrid and electric vehicles that pollute much less than old internal combustion engine and diesel vehicles. These cleaner cars produce air quality, public health and other environmental quality benefits for everyone. With federal tax credits incentivizing purchases of electric vehicles, why create a new VMT tax system that charges people more?

Fourth, gas taxes price carbon to discourage greenhouse gas pollution and promote solutions. If you’re driving fuel efficient, low-polluting cars like the Chevy Bolt, Ford Focus, Nissan Leaf or Toyota Prius, then you’d pay the same VMT tax as someone driving a highly-polluting gas guzzler. Illinois won’t face a large erosion of gas tax revenues from electric vehicle market penetration for many years. There’s no real problem to solve now.

Fifth, heavy trucks that cause an extraordinary amount of road wear-and-tear could get off easy under VMT taxes. The Congressional Budget Office’s March 2011 report, in comparing gas taxes and VMT taxes, emphasized the disproportionately high road wear from trucks compared to miles driven: “Heavy trucks travel less than 10 percent of all vehicle miles, but their costs per mile are far higher than are those for passenger vehicles, and they are responsible for most pavement damage.”

Sixth, many people have sincere privacy concerns that VMT taxes require drivers to install tracking devices that enable governments to view their mileage, locations and time of travel. Pew Research’s February 2015 poll found that 67 percent of Americans said that “Not having someone watch you or listen to you without your permission” was “Very important” to them, with an additional 20 percent responding “Somewhat important.”

If legislators are reluctant to raise gas taxes, then why do they think VMT taxes would be any more popular? Illinois policymakers can support gas tax increases — as many states have already done — to improve transportation infrastructure. A VMT tax is the wrong tool to address Illinois’ transportation challenges.

This post originally ran in Crain’s Chicago Business. Read the article HERE.