Pay to Drive by the Mile, Not the Gallon

by Nicole Morell on October 13, 2016 · 9 comments

in Data, Design, In the News, Transportation

Take a short trip in a car and it’s easy to see that many roads are in dire need of work. Thankfully, states have a system of coming up with money for many roadway needs: the gas tax. But in many states, revenue from the gas tax doesn’t fully cover infrastructure needs, explains Matthew Dorfman SM ‘07 and Travis Dunn SM ’05, PhD ’10, co-founders of D’Artagnan Consulting. One reason for the shortfall is increased vehicle fuel efficiency—people buying less gas means less gas tax being paid.

“When fuel efficiency goes up, gas tax revenue goes down,” Dorfman says. To solve this revenue problem, Dorfman and Dunn say it’s time to get rid of the gas tax as a means of funding roads, and, instead, charge drivers to raise revenue in a new way.

Dorfman and Dunn suggest paying by the mile, not at the pump.

Dorfman and Dunn suggest paying by the mile, not at the pump.

That’s why in California 5,000 drivers are now tracking their miles with the help of an app or GPS device. For each mile they cover, these drivers are charged a hypothetical 1.8 cents. These drivers are part of a pilot program facilitated by D’Artagnan Consulting that explores replacing the gas tax with usage fees. The road usage fee works simply: Users pay a set fee based on the number of miles they drive, much in the same way people pay for their electricity or water based on the amount they use. Drivers pay only for the number of miles they spend on the road. Dorfman and Dunn say the idea for a usage fee for roads is based partly on covering revenue gaps—studies show usage fees would raise more revenue than current gas taxes—and partly on changing the way people think about driving. “We’re trying to convince people to treat the roads like a utility. No one knows why they are paying what they are paying, so there is a disconnect. We’re trying to get people to think differently,” Dunn says.

Dorfman says this approach to the gas tax issue—part strategy and part innovation—was driven by his experiences in MIT’s Technology and Policy Program. “It’s not just about the tech and the software and the algorithms,” he explains. “We have seen examples to dealing with this that focus exclusively on the tech part. They always fail because by just focusing on technology you miss the chance to connect to people,” he says.

The future of usage fees for roads remains to be seen, but Dorfman and Dunn are encouraged by the number of states exploring the idea—Washington and Minnesota have also run pilot programs and Oregon, which also worked with D’Artagnan Consulting, now offers a usage charge program as an option to its drivers. Singapore and London have used electronic road pricing to reduce congestion for years.

Dorfman and Dunn say that no matter what policy changes are made, Americans need to move away from the gas tax. “Relying on fuel consumption to pay for roads is like relying on taxes from cigarettes to pay for healthcare services. You want to stop people from relying on that,” Dunn says.

{ 9 comments… read them below or add one }

Alan Friot October 13, 2016 at 10:06 am

What about people who ride bikes, or walk these pathways do they pay as well?

Reply

Edwin Lee October 13, 2016 at 12:28 pm

Seems like an inferior solution which removes any tax incentive to buy vehicles with better gas mileage. The simple solution is to increase the gas tax rate at the rate that average mileage increases. This encourages the vehicle development which is in the public interest. When electric cars (not hybrids) become more than 2 or 3 % of the population…they should be converted to mileage charges suggested.

Lack of highway repair has much to do with Congress and decisions by State Legislatures to spend the money elsewhere. Separate issues that need to be dealt with directly.

Reply

George Carrette October 13, 2016 at 12:42 pm

Your suggestion to pay for roads by the mile does nothing to fix the real problem, which is non-transparency in politics. Take Massachusetts for example, the gas tax goes into general revenue. Any additional per-mile taxes would also go into general revenue. The same thing happens at the Federal level. Even the public toll road scenario can be a scam when it becomes a place for feather bedding the relatives of politicians and political contributors and/or to cook the books on larger projects such as the Big Dig.

Of course there are vendors who push new ideas and new technologies for collecting revenue. In economics that is called rent seeking behavior.
Nothing wrong with that, but please, try to sound less naive when discussing it.

Reply

Joseph Kozikowski, Course VI, '56 October 13, 2016 at 1:42 pm

The lighter vehicles produce less wear on the roads than SUVs or pickups. The distance algorithm seems too simple.

Reply

Anu Sood October 13, 2016 at 2:33 pm

Is there any way to account for the weight of the vehicle, or at least the number of axles? Trucks cause a significant amount of wear and tear relative to passenger vehicles – and isn’t there already a tax system in place based on miles and weight for commercial trucks? I know that 90% of the potholes are due to large, heavier trucks.

Once we have the government tracking our vehicle movements, then will this information be subject to hacking or possibly other law enforcement use, etc.? And what about charging more during rush hours – I can see all roads becoming like toll roads! And will this reduce our vehicle registration fees?

Reply

Edwin Lee October 13, 2016 at 4:02 pm

Taxing on fuel consumption taxes the weight of the vehicle… since weight correlates strongly to distance per gallon. Again…the current taxation system ain’t broke…so why fix it.

Reply

Joseph Kozikowski, Course VI, '56 October 14, 2016 at 5:56 pm

I agree with Edwin Lee. In addition to gasoline, fuels can be diesel, natural gas, propane, etc. For electric cars, fuel is Coulombs of charge consumed. Various fuels would need to be monitored and taxed at the appropriate rate. Otherwise, tax on miles and weight of vehicle, e.g.: Tax = rate(miles)(weight factor).

Reply

Thom Burns October 13, 2016 at 3:09 pm

What is wrong with using odometer readings to measure mileage? That’s what we do when looking a buying a used (sorry, pre-owned) vehicle. I know that sometimes odometers don’t work, but with seals and frequent readings, that should be surmountable.

Reply

Thom Burns October 13, 2016 at 3:14 pm

Another comment: “studies show usage fees would raise more revenue than current gas taxes” but only if rates per mile are set to raise more than the current gas taxes. Gas taxes would also raise more revenue if they were higher! I am always skeptical that the increased revenue would actually be spent on roads–it is not today as the gas taxes have traditionally been raided for other pet (pork barrel) projects.

Reply

Leave a Comment

Previous post:

Next post: