November 25, 2021
Funding our nation’s infrastructure is always a topic of discussion when politicians speak about what is important, when taxes come up, and when we ask about the priorities in our country. The road usage charge is a proposed solution because our infrastructure is in a state of serious disrepair. Our roads, bridges, and tunnels are getting older every year, and we are not keeping up with the necessary maintenance and repair to keep them in good shape. A significant portion of our nation’s roads are falling apart, and we do not have the funds to fix them due to our current system.
Right now, gas tax revenue funds infrastructure initiatives. However, there are a couple of reasons that the gas tax simply doesn’t cut it anymore for funding repairs and maintenance on our roads. The first is that the gas tax hasn’t kept up with inflation in 25 years. As a result, the gas tax is now worth 40% less than 25 years ago. This is an immense problem, as it means that as the roads suffer more wear and tear with higher populations and more vehicles, our Highway Trust Fund gets less money to handle the traffic. Secondly, even though more vehicles are on the road, less are paying into the Highway Trust Fund than ever due to electric vehicles and fuel-efficient vehicles. These vehicles inflict as much wear and tear on the road as other vehicles, but they do not pay as much gas taxes as other drivers. This is another reason why our roads are deteriorating faster than we can repair them.
For a few years, the road usage charge has been proposed as a solution to this issue. This article will break down what exactly road usage charging is and how it can solve the challenges that the gas tax simply isn’t meeting. Then, we will discuss how it is already being implemented across the country to see how a wide-scale program would look.
Road usage charging, also known as RUC, is a practice in which the government charges drivers for using the road based on how many miles they travel instead of charging based on how much fuel they consume. There are many names for road usage charging, including distance-based user fees (DBUF), mileage tax, vehicle miles traveled tax (VMTT), and mileage-based user fees (MBUF). Many people compare road usage charging to tolls, but they are different. While tolls charge motorists for using a specific feature such as a freeway, tunnel, or bridge, road usage charging applies to all roads within a particular area, 24/7.
In states where it’s been implemented, drivers simply install a device into their OBD port, which most vehicles built after 1996 already have. Then, they set up a digital wallet online. The system tracks how many miles they drive and automatically deducts money from their wallet based on the miles. In Oregon, any fuel tax paid at the pump is credited to the wallet so drivers are not taxed twice.
Only two states currently have fully functioning road usage charging programs: Oregon and Utah.
Oregon was the first state to implement a road usage charge. The pilot project launched in 2015 and the program officially began on January 1st, 2020, when registration fees for electric and fuel-efficient vehicles increased. Drivers have the option to get a deep discount on these higher registration fees by enrolling in the Oregon road usage charging program, OReGO, and paying 1.8 cents per mile (which will change to 1.9 cents in 2022). Drivers are also credited for gas tax paid at the pump. OReGO harnesses Azuga Insight's technology to track driver miles and automatically collect revenue, much as described above. Because the process is automatic, it requires far less staff and is cheaper to implement over the long term.
Drivers who opt in are required to meet the following vehicle specifications:
Utah’s system is very similar to Oregon’s. Drivers pay 1.5 cents per mile, and their program uses DriveSync technology. In both programs, drivers are refunded the money they pay towards the gas tax during the year.
More than half of all state governments in the U.S. is monitoring, testing, or has implemented a road usage charge system. There are also two major state collaborations, RUC West and The Eastern Transportation Coalition, working together to research and share knowledge on the topic. Here are some of the highlights.
Washington: Washington tested a road usage charge pilot program, and in January 2020, completed a report on how the state can transition from the gas tax towards the road usage tax.
California: California ran a pilot in 2016 on more than 5,000 vehicles. This pilot ran for more than 37 million miles. They found that 90% of people would be willing to participate in a permanent program, and 85% were satisfied with how the pilot went. 73% agreed that a road charge is fairer than a gas tax.
Colorado: When Colorado ran their road usage charge pilot, they found that 93% of people were satisfied with the program, and 91% would participate in a future road usage charge program. 81% agreed that a road usage charge is fairer than a gas tax.
Delaware: Delaware ran a smaller road usage charge program with about 150 drivers to encourage participation in a road usage charge down the line. This project had two focuses: tracking which roads receive the heaviest use and boosting public support for the idea of a road usage charge in Delaware.
Hawaii: Hawaii tested a road usage charge as well. Their goal is to use 100% clean energy by 2045, so they want to encourage the use of electric and fuel-efficient vehicles while still maintaining their roads and infrastructure.
Pennsylvania: Pennsylvania has been looking at implementing a road usage charge for a long time and considered an official proposal in July of this year. They’ve also considered increasing the registration fee for fuel-efficient and electric vehicles, similar to what Oregon and Utah have done in tandem with their RUC program. They have also considered raising the gas tax, which is difficult to pass in this modern politcal climate and will not solve the problem long-term as people move to electric vehicles.
Minnesota: Minnesota has conducted opinion surveys on road usage charges to be popular and successful with citizens. They want to implement something similar to Oregon’s program.
There are many benefits to road usage charging that states should consider when discussing solutions for their infrastructure problems. Many of these benefits directly resolve the issues presented by the gas tax and sustain infrastructure in the long term.
The safety of our nation’s roads should be a top priority for everyone. Visit any politician’s webpage on either side of the aisle. You will find that they have a page on infrastructure talking about the terrible state of disrepair that our roads are in and proposing solutions to fix it. Usually, these solutions involve simply throwing more funding at the issue. However, it would take a significant amount of money to improve our country’s roads. A staggering 49% of the roads in the United States are considered unsafe. These road conditions cause 22,000 traffic fatalities and 38% of injuries every year. Nobody would argue that safer roads are not a crucial goal. Implementing road usage charging would bring in an additional $340 million in funding that would go towards repairing and maintaining our nation’s crumbling infrastructure, keeping our drivers safe for a long time to come.
As mentioned previously, not all vehicles are currently paying into the Highway Trust Fund right now. Electric and fuel-efficient vehicles pay little or nothing towards the gas tax, and this is not fair. These vehicles inflict wear and tear on the road just like any other vehicle and should also pay for maintenance and repair. This is why road usage charging is a fair solution for everyone: because it means that everyone is contributing in tandem with the wear and tear they inflict on the road. And drivers of electric and fuel-efficient vehicles are still incentivized with lower registration fees, meaning they are not left disadvantaged. Road usage charging is simply fairer for everyone involved.
Even though road usage charging brings in more funding than the gas tax, you may be surprised to learn that it costs about the same to the driver as the gas tax. As mentioned previously, Oregon’s road usage charging program costs 1.8 cents per mile, and Utah’s costs 1.5 cents per mile. In Kauai County, Hawaii, researchers did a study based on these figures and found that the average driver pays about $75 annually under the gas tax. Based on the statistics from Oregon and Utah, they would also pay about $75 annually under road usage charging. There is more funding because more drivers are paying into the system, as electric vehicles and fuel-efficient vehicles contribute. Furthermore, there are minimal administrative costs associated with implementing road usage charging.
If a system is too difficult to set up, it will not work on a wide scale. That is why the plug-and-play system is working so well for states like Oregon. All drivers have to do is plug a device into their OBD port and set up an online account, and everything is ready to go. The system automatically tracks how many miles are traveled and automatically applies gas tax credit and collects the funds, so very little management is needed either on the administrative side or the driver’s side. This limits costs on the state and incentivizes drivers to enroll since it is so little effort for them.
Infrastructure is a central issue to figures on both sides of the political spectrum. This only makes sense since keeping citizens safe is a goal that everyone can get behind. Recently, Transportation Secretary Pete Buttigieg expressed his support for road usage charging. He said that a mileage tax “shows a lot of promise if we believe in that so-called user-pays principle: The idea that part of how we pay for roads is you pay based on how much you drive.” This means that the Biden administration has road usage fees on the table to solve our nation’s infrastructure problems long term. In the meantime, the administration has been allocating funds towards maintaining infrastructure. In fact, on November 15th, President Biden signed into law a $1 trillion infrastructure bill that will allocate billions to states and local governments to upgrade outdated roads, bridges, and transit systems. The bill also outlines a national pilot for road usage charging to gain a full understanding of whether an at-scale program would be effective and sustainable long into the future.
Azuga has helped make road usage charging a reality with the creation of Azuga Insight. Azuga is a leader in transportation technology and will continue to update our blog regarding any changes in legislation and state initiatives towards making road usage charging a reality for our nation. Improving infrastructure should be a goal for everyone, so stay up to date with our blog and on Twitter @AzugaInsight.