Friday, 29 June 2012

US House of Representatives rejects funding Vehicle Mileage Tax studies

The US Congress is currently in the process of seeking agreement for a new Bill to authorise transportation funding for the next six years.  It has been a fraught process, and not one I will discuss in detail here.  

The big news from a road pricing perspective is that the House of Representatives, which is Republican dominated, has agreed to an amendment that effectively ceases Federal funding into studies into Vehicle Mileage Tax (VMT) according to The Hill.

Now the issue isn't completely closed as a Bill needs to pass the Senate as well, but the likelihood is that the Democrats wont push it that much.  So what does it mean and what was the reason for the amendment?

What it means, if it passes like this, is that there will be no Federal funding from programmes to investigate new sources of revenue such as the Value Pricing Pilot Program from the Office of Innovative Program Delivery, in respect of VMT itself.  Presumably studies can continue on tolling, including HOT lanes, congestion pricing and even network wide tolling that isn't about VMT strictly speaking.   This will no doubt hinder progress in some states, but would mean a few years of investigating options to raise revenue that can't be efficiently implemented across entire road networks.   Information about some of the studies carried out so far is on the Federal DoT website here.

It may mean that states themselves take the initiative (much like Oregon has for some time) to do the hard work themselves to consider how to shift to alternatives to the "gas tax".  

However, it is worth considering why this amendment was put forward.

The blocking of further funding for this was proposed by Rep. Chip Cravaack (R-Minn.). He argued that it would “would hurt rural drivers, cost a lot to implement, since it would require devices in each car to track how many miles have been driven, and could impinge on privacy rights.”

Now I’m not one to argue whether or not the Federal Government ought to be responsible for funding such studies, as it really depends on whether it wants to supplement or replace its own Federal gas tax. However, I can question the view of Rep. Cravaack, which contains a range of misconceptions. 

I'll go through them point by point:

Hurts rural drivers: This is a question of equity, and whilst the issue of equity raises claims of winners and losers, the only sure way to ensure equity is to charge according to a fair allocation of costs. Charging by distance on the face of it, means you use the road network more so you pay more. However, does that mean rural users are likely to be overcharged? There is a paucity of accessible research on the revenue generated by different roads by location. However, what I have seen over the years indicates that rural roads get heavily cross subsidised simply because the fixed costs of those roads can’t be recovered easily from the very low volumes of traffic on them. So the question comes as to who should subsidise them or if there is a better way to take this into account. One way is to ask whether the access value of a road to a property might better be recovered from charging the property itself as well as the motorist. That could mean not charging rural trips as much, because property owners value others being able to get to their properties. My counter-argument to this one, is that vehicles visiting rural areas should also pay.  Besides, fuel taxes hurt people who can’t afford new fuel efficient vehicles.  There is a concern that is worthy of debate, but rural roads will equally benefit if heavy trucks pay for the long mileage they undertake on them.  My point is that what is charged (and how it is charged) should reflect cost.

“Cost a lot to implement”: Well I am sure if the US Federal Government was to implement it, it would do so. However, that argument is being eroded by the successful implementation of such systems in other countries and the work underway today in Oregon. Fuel taxes are always cheaper, but then it would probably be argued as being cheaper to collect money for food through an income tax and to have the government buy everyone rations, rather than have thousands of shops and businesses do it. It doesn’t mean it is better or results in more economically efficient outcomes.  Costs are relative to the benefits that are generated for them.  For now one of the big issues is how to efficiently minimise costs to unlock the benefits of VMT, especially over the longer term.   More studies could help better inform this debate.

“it would require devices in each car to track how many miles have been driven”: Maybe, maybe not. Many people carry devices that aren’t too far removed from that now. Cars are capable of having such equipment pre-installed anyway. The word “track” can be replaced with “record”, since there is no need to know every road everyone has gone down to charge distance.  Indeed, you can use more conventional tolling technology involving tags and beacons (DSRC) to do VMT on major highways, as is done today in Austria, the Czech Republic and Poland.  However, the presence of equipment to do more shouldn't be seen as necessarily an insurmountable or expensive problem.  In New Zealand, which has a nationwide VMT system for all heavy vehicles on all roads, commercial vehicle owners are choosing to pay for devices that measure distance more reliably than their hubodometers and provide other services. 

“Could impinge on privacy rights”: well yes it could, but it need not do so. Oregon is specifically including an option that is designed to do that. However, there are plenty of ways to protect privacy. The bogey that the government is tracking every movement is often cited, and it is encumbent upon those of us advocating VMT systems to explain why these fears can be easily addressed, plus pointing out that mobile phone companies can already effectively track people’s movements now. If road utility service providers offered the charging service, the effect on privacy would be no different.  After all, what matters is that people pay for what they use, and it is possible to separate the calculation of what to pay from the collection of payment (and the data needed to determine what to pay - e.g. roads could be classified by tariff categories A, B, C in a system, not with the names of the roads).

The Federal Government has a problem, its budget for expenditure on surface transportation is higher than the revenue it gets from road users. It can either cut the budget to match this or raise the existing taxes, or find a new source of revenue.

If it wishes to cut the budget, either because it wants to leave it to the states or there are sound reasons to presume there are significant efficiencies that can be extracted from current activities, then fine.

However, if it does want to address the issue of subsidising the Interstate highway network, it has to confront the declining yields of the “gas tax” either by raising it or replacing it.

By deciding explicitly to not investigate replacing it with the most economically efficient alternative, then it looks like the future involves more subsidies of highways or increases in gas tax. In an age when many people want better value for money, and there is a trend towards more user pays and more business-like ways of managing infrastructure, it seems strange to ignore one way forward in delivering that.

Meanwhile, I am sure the states will push forward, just more slowly this time.

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