Mileage Fees and How They Affect Driver Cost

April 28, 2021

What’s keeping our roads, bridges, and tunnels in shape? That would be the Highway Trust Fund, which receives funding from the taxes you pay when you fill up your car with gasoline. However, these funds are no longer sufficient, and our infrastructure is falling apart as a result. The US Department of Transportation reports that 65% of major roads in the US are in “less than good condition.” This road deterioration results in thousands of accidents and injuries yearly. The mileage tax is a proposed solution to this problem. What is the mileage tax, and how is it better than the gas tax?

Why Won’t the Gas Tax Cut It Anymore?

There are two significant reasons why the gas tax can no longer fund the Highway Trust Fund. The first reason is inflation. The gas tax has not adjusted to keep up with inflation in the last 25 years. It is now worth over 40% less, while the population increases and traffic becomes heavier on the roads as they age. The streets are getting more worn down as funds dwindle each year. 

The second reason is the increase in fuel-efficient and electric vehicles. These cars pay very little to nothing in the gas tax, meaning they drive on the roads but do not contribute to maintaining them. Although it is good that these vehicles are increasing as it is better for the environment, it is still important that every vehicle contributes to paying for the roads that they drive on. 

What is the Mileage Tax?

The mileage tax is just what you’d expect — a fee based on how many miles a driver drives. It may also be known as road usage charging (RUC), distance-based user fees (DBUF), vehicle miles traveled tax (VMTT), or mileage-based user fees (MBUF). 

This type of tax is not currently a widespread practice. As of right now, Oregon is the only state with a fully functioning RUC program, known as OReGO. However, Washington, California, Colorado, Delaware, Hawaii, Pennsylvania, and Minnesota are also implementing RUC programs with success. 

What is Better About the Mileage Tax?

The most apparent benefit of the mileage tax is that it charges all drivers based on how much they use the road. This type of assessment means that more drivers are paying into the Highway Trust Fund based directly on how much they use the streets. Experts estimate that implementing an RUC plan nationwide would put an additional $340 million into the Highway Trust Fund, funding improvements to roads, bridges, and tunnels, and even creating new roads where populations have increased over the past decades. 

Safer roads are a must, especially as infrastructure continues to age. The Pacific Institute for Research and Evaluation found that aging roads in poor condition cause over 22,000 traffic fatalities and 38% of injuries. This is a significant issue that we must address. Regular maintenance of roads is a necessity for any sized community. More funding in the Highway Trust Fund would allow for this desperately-needed maintenance.

Furthermore, the mileage tax is fairer to drivers than the gas tax. It costs about the same for most drivers but ensures that all drivers pay their fair share, including those that drive fuel-efficient and electric vehicles. These vehicles still use the roads and cause wear and tear on them, so they should pay for their use. Everyone pays only for what they use, so you do not have to pay very much if you do not drive very often. 

How is the Mileage Tax Implemented?

As mentioned, the only place where the mileage tax has been widely implemented is in Oregon with their OReGO program. However, they set the example for how to implement the mileage tax on a broader scale. OReGO uses Azuga Insight to track driver miles and collect revenue, so there isn’t any staffing necessary to keep track of everything. Drivers who opt-in must meet the following vehicle requirements. 

  • Light-duty
  • 20 miles-per-gallon or better rating
  • Registered to an Oregon resident

Participation is optional, but drivers who enroll do not pay the increased registration fees based on the mpg rating. Drivers will then install the hardware to their OBD port and set up their digital wallets. When they drive, the system automatically tracks how many miles they drive and deducts the money from the digital wallet. The driver doesn’t have to do anything! It’s easy to set up and easy for both the driver and the state to keep track of. 

Conclusion

The mileage tax is most likely the way of the future for funding infrastructure. It’s a plan that benefits everyone. It does not cost drivers more than what they are currently paying but ensures that states have the funding they need to keep drivers safe on the roads. Azuga is leading the way in RUC technology and is currently working with other states to implement Azuga Insight across the country. To keep up to date with everything that is happening with RUC, follow our blog.

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Mileage Fees and How They Affect Driver Cost

April 28, 2021

What’s keeping our roads, bridges, and tunnels in shape? That would be the Highway Trust Fund, which receives funding from the taxes you pay when you fill up your car with gasoline. However, these funds are no longer sufficient, and our infrastructure is falling apart as a result. The US Department of Transportation reports that 65% of major roads in the US are in “less than good condition.” This road deterioration results in thousands of accidents and injuries yearly. The mileage tax is a proposed solution to this problem. What is the mileage tax, and how is it better than the gas tax?

Why Won’t the Gas Tax Cut It Anymore?

There are two significant reasons why the gas tax can no longer fund the Highway Trust Fund. The first reason is inflation. The gas tax has not adjusted to keep up with inflation in the last 25 years. It is now worth over 40% less, while the population increases and traffic becomes heavier on the roads as they age. The streets are getting more worn down as funds dwindle each year. 

The second reason is the increase in fuel-efficient and electric vehicles. These cars pay very little to nothing in the gas tax, meaning they drive on the roads but do not contribute to maintaining them. Although it is good that these vehicles are increasing as it is better for the environment, it is still important that every vehicle contributes to paying for the roads that they drive on. 

What is the Mileage Tax?

The mileage tax is just what you’d expect — a fee based on how many miles a driver drives. It may also be known as road usage charging (RUC), distance-based user fees (DBUF), vehicle miles traveled tax (VMTT), or mileage-based user fees (MBUF). 

This type of tax is not currently a widespread practice. As of right now, Oregon is the only state with a fully functioning RUC program, known as OReGO. However, Washington, California, Colorado, Delaware, Hawaii, Pennsylvania, and Minnesota are also implementing RUC programs with success. 

What is Better About the Mileage Tax?

The most apparent benefit of the mileage tax is that it charges all drivers based on how much they use the road. This type of assessment means that more drivers are paying into the Highway Trust Fund based directly on how much they use the streets. Experts estimate that implementing an RUC plan nationwide would put an additional $340 million into the Highway Trust Fund, funding improvements to roads, bridges, and tunnels, and even creating new roads where populations have increased over the past decades. 

Safer roads are a must, especially as infrastructure continues to age. The Pacific Institute for Research and Evaluation found that aging roads in poor condition cause over 22,000 traffic fatalities and 38% of injuries. This is a significant issue that we must address. Regular maintenance of roads is a necessity for any sized community. More funding in the Highway Trust Fund would allow for this desperately-needed maintenance.

Furthermore, the mileage tax is fairer to drivers than the gas tax. It costs about the same for most drivers but ensures that all drivers pay their fair share, including those that drive fuel-efficient and electric vehicles. These vehicles still use the roads and cause wear and tear on them, so they should pay for their use. Everyone pays only for what they use, so you do not have to pay very much if you do not drive very often. 

How is the Mileage Tax Implemented?

As mentioned, the only place where the mileage tax has been widely implemented is in Oregon with their OReGO program. However, they set the example for how to implement the mileage tax on a broader scale. OReGO uses Azuga Insight to track driver miles and collect revenue, so there isn’t any staffing necessary to keep track of everything. Drivers who opt-in must meet the following vehicle requirements. 

Participation is optional, but drivers who enroll do not pay the increased registration fees based on the mpg rating. Drivers will then install the hardware to their OBD port and set up their digital wallets. When they drive, the system automatically tracks how many miles they drive and deducts the money from the digital wallet. The driver doesn’t have to do anything! It’s easy to set up and easy for both the driver and the state to keep track of. 

Conclusion

The mileage tax is most likely the way of the future for funding infrastructure. It’s a plan that benefits everyone. It does not cost drivers more than what they are currently paying but ensures that states have the funding they need to keep drivers safe on the roads. Azuga is leading the way in RUC technology and is currently working with other states to implement Azuga Insight across the country. To keep up to date with everything that is happening with RUC, follow our blog.

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