Don't Mess With Taxes

Danielle Scott via Flickr CC

I'm exploring an auto insurance option that could my policy premiums. It's a discount for folks who don't drive very much. The trade-off is that I must install a travel tracker in my car.

That same sort of tracking system is what a handful of states use to charge motorists by the distance they drive instead of by their fossil fuel usage.

Oregon, Utah, and Virginia have implemented per-mileage vehicle taxes. Hawai'i is poised to be the fourth.

And a national per-mile pilot program is planned, thanks to funding included in 2021's Infrastructure Investment and Jobs Act (IIJA).

EVs challenging fossil fueled cars: Why the switch? The usual reason. Money.

The states trying out per-mile taxes need to replace traditional fossil fuel taxes that have been steadily declining. 

Newer autos get much better fuel efficiency, meaning less fill-ups.

Plus, more electric vehicles (EVs) are hitting the country's roads. U.S. Bureau of Labor Statistics data shows that electric car sales in the United States went from just 0.1 percent of total vehicle sales in 2011 to 4.6 percent in 2021.

The number of EVs on roads will get a boost in 2035. That's the year seven states — California, Maryland, Massachusetts, New Jersey, New York, Oregon, and Washington — will ban sales of new gas-powered vehicles.

Some states also are charging EV owners added registration fees to make up for the fuel taxes they don't incur.

How it works: The Beaver State was the first to try out a road instead of fuel tax. It went into effect in 2015.

OReGO, as the program is known, charges voluntary participants 1.9 cents for each mile they drive on Oregon roads. Motorists create an account, select a mileage reporting option, and receive a bill for reported miles.

The OReGO bill also includes a fuel tax credit.

Oregonians with fossil fuel-powered vehicles pay a 38 cents per gallon fuel tax. OReGO participants receive a credit for the fuel tax they pay, up to a zero balance. By law, fuel tax credits cannot exceed road charges.

The road tax money goes into Oregon's State Highway Fund for construction, maintenance, and preservation of roads and bridges.

Nationwide mileage tracking: While mileage-based user fees, also known as Vehicle Miles Traveled (VMT) fees, have supporters, they haven't yet been embraced by drivers. As noted, only three-going-on-four states have such systems in place.

This small number comes after a prior federal infrastructure law, the Fixing America's Surface Transportation, or FAST, Act of 2015, funded similar test programs. That Obama Administration law funded per-mile pilots in 13 states as well as two coalitions of states, one on the east coast and the other in western states.

The national pilot mandated under IIJA will have those earlier results upon which to build a program that solicits volunteer participants, including drivers of commercial and passenger vehicles, from all 50 states.

The law requires the U.S. Department of Transportation-managed pilot program to offer different methods for participants to track their mileage. This could include such things as smartphone apps, telemetric data collected by automakers, and motor vehicle data obtained by car insurance companies.

Privacy, hassle factors: That last possible option, auto insurers' data, is one of the reasons that many people might resist the per-mile information collection, even if it saves them tax dollars.

I'm hesitant to sign up for my insurance company's program because its Bluetooth connected device will also monitor how I drive. I'm a safe driver, but I'm not sure what parameters the insurer uses for acceleration, braking, etc., data that it wants to collect in addition to my driving distances. Could the findings instead bump up my policy's cost?

Plus, the app might such more of my phone's battery, which already is a concern on my aging device.

I have to have the insurance app set to always on so the vehicle tracking device can register the data. I tend to turn off Bluetooth when I'm at home. But if I don't remember to turn it on when I get into my car, the tracking system won't work, i.e., won't reduce my policy amount.

Such concerns were noted in a 2022 Government Accountability Office (GAO) report to Congress on challenges in developing mileage fee systems.

The GAO factors include —

• Privacy. State pilot administrators found that drivers were concerned about the government tracking their location. Technology to track miles driven does not have to include GPS data, and technology that does track location can be subject to various privacy policies.
• Equity. Some state transportation officials noted that the public believed rural drivers would pay more than their fair share under a mileage-based user fee system. However, despite this perception, several states reported that disparities in fees paid by rural drivers compared to other drivers are greater under gas taxes than mileage-based user fees.
• Administrative costs. Pilot administrators noted potentially expensive aspects of mileage-based user fees including start-up costs of a new system, operating costs and data processing, and enforcement costs with certain mileage tracking technology.

Would you enroll in a state or federal mileage tax? Would it depend on the amount of tax assessed under each method? Or would privacy and reporting hassle factors savings discourage your participation?

Those are the questions I'm asking myself now in connection with my insurance discount option. My answers might help me decide whether to participate in the national mileage-tax pilot program when the DoT gets it going.

Scenic drives addendum (June 30, 2023): I just posted my June tumblr item at my Tumbling Taxes blog. Its video is of scenic U.S. drives, which could at least make a per-mile tax a little more enjoyable. The first one in the video is, fittingly, along Oregon's Pacific Coast. 

You also might find these items of interest:

• Texas joins the electric vehicle fee club
• Time to track your 2023 tax deductible business miles
• Road user fees becoming more popular as more EVs hit U.S. highways

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