August 1, 2022
This blog is Part 4 of a six-part series titled A Closer Look at Road-User Fees. The series explores six major objections to the implementation of a per-mile road charge and aims to dispel misconceptions and disinformation.
As gas tax revenues continue to dwindle beneath the growing adoption of fuel-independent vehicles and while decades-old roads and bridges crumble, state and federal governments are looking to alternative funding sources. One of the most promising solutions is a road usage charge, a per-mile fee assessed to all drivers for their use of public roads. The idea is still being developed across the nation, and opponents claim that such a system must be too complicated and costly to be sustainable or effective. This article will explore this objection and look at the existing funding mechanism: fuel tax.
Let’s look at some facts.
The fuel tax isn’t without complications. Several factors go into the cost and collection of fuel tax such as jurisdiction, fuel types, and importation. State and local fuel taxes are added at various rates on top of the federal fuel tax. And, while most states have a flat rate, nineteen states and the District of Columbia have implemented gas tax rates that vary with the changes in fuel price, the inflation rate, vehicle fuel-economy, or other factors.
The fuel tax has had over 100 years to evolve. No wonder it’s difficult to imagine anything different. Since its inception in Oregon in 1919, the fuel tax has had many kinks worked out over decades of testing and adjusting. Even the cost of imposing the fuel tax has improved over the decades. But, that’s not to say it’s a forever-solution. Fuel-efficiency varies widely from vehicle to vehicle, far more so than it did in the beginning.
The fuel tax is no longer fair. At its beginning when every vehicle had similar fuel efficiency ratings, fuel tax was the ultimate user-pays system for public roads. The more you drove, the more you paid; however, growing fuel efficiency has placed the fuel tax burden on owners of older and less fuel-efficient vehicles. Fuel tax has evolved from a user-pays model to a some-pay/all-benefit model as electric and hybrid vehicles become prevalent.
No doubt, this brand new funding solution has its complexities. Mileage reports for millions of individual drivers must be overseen. Wireless carriers must be managed to transmit data from plug-in mileage reporting devices. Multiple channels of reporting options must be managed to ensure every unique vehicle and individual driver has options from which to choose. Charges must be calculated and payments collected. Finally, compliance must be enforced and all mileage taxes must be sent to the government for processing.
However, despite their seemingly complicated nature, road usage charges are an upgrade from the fuel tax. Let’s review the facts:
All complications are absorbed by the account managers. For example, as an account manager (AM) for Oregon’s road usage charge program, OReGO, Azuga manages all aspects of mileage fee collection on behalf of the Oregon Department of Transportation. Payment systems are streamlined and strategies to mitigate human error and fraud are continuously reviewed and improved. We assist drivers with everything from signing up, to complying with program requirements, to making payments. In any program, the role of the AM is to make the program as convenient and seamless as possible for drivers and government alike. One or a handful of AMs can easily manage millions of drivers throughout the lifetime of the program.
Costs will continue to decrease. Any tax collection system has associated costs and road usage charging is no exception. The data required to run a road charging program has a large price tag; however, the latest projections predict this cost will significantly decrease over time, especially as more and more drivers are required to report mileage. When every driver is paying mileage fees, the cost of data management is spread out over a much larger revenue stream, thereby making road usage charging more cost-effective.
Road usage charges are a simple, multi-purpose solution to a complex issue. In today’s increasingly eco-friendly world, it makes sense to tax the use of fossil fuel; however, a fuel tax does not penalize those who use the roads the most (and therefore cause the most road wear). Gas tax penalizes owners of older, less efficient vehicles (usually rural drivers), while allowing electric vehicle owners to escape payment. On the other hand, road usage charges are a fair alternative, charging every driver for exactly how much they drive—regardless of what vehicle they own. Additionally, if a state deems it necessary, road usage charges can be applied to help discourage traffic congestion and reduce vehicle emissions pollution.
More research is required to make road usage charging a reality. Governments need more knowledge to mitigate challenges and document specifications on how to run a new system efficiently and effectively across an entire country. Research also helps educate the public on the issue and provides a smoother transition into program implementation.
Road usage charges are not as built-in and “invisible” as the good old fuel tax that we all have grown so used to, but the fuel tax is no longer relevant to a world steadily pursuing electrification. Connected vehicle technology and data management are still in development and research is necessary for the continuous development of a streamlined, efficient funding system. In turn, costs will decrease significantly at scale and over time. As an account manager for road usage charge programs, Azuga continues to mitigate costs by giving people multiple mileage reporting options (some of which do not require aftermarket devices) and by relentlessly cutting costs whenever possible.
Want to learn more and be in-the-know about road usage charges? Stay tuned to our blog for more on A Closer Look at Road-User Fees.
Are road usage charges a double tax?