LANSING—It's no secret that Michigan's transportation network is in trouble. Declining revenues are increasingly unable to keep up with rising maintenance costs. Existing infrastructure is aging, costs for asphalt and concrete continue to rise, and a pattern of deferred maintenance is promising even bigger expenses down the road.
"It's a choice of spending $12 billion [now] or $25 billion later,” Gov. Rick Snyder declared before the state legislature earlier this year as he encouraged increased investment in the state's roads. His analogy: “you can change your oil or you can rebuild your engine".
The trouble, however, is coming up with the money.
That's because in Michigan, like in most states, transportation funding comes almost exclusively from pay-at-the-pump taxes on gas and diesel. But the gas tax, unlike most other taxes, is a fixed amount, which means that inflation eats away at it every year. Consequently, the taxes (19 cents per gallon for gas and 15 cents for diesel) have lost about a third of their purchasing power since they were last raised in 1997.
“...since gas taxes also fund pedestrian infrastructure and mass transit, a decrease in gas tax revenues is a problem for everyone, not just people who use roads.”
To make matters worse, Michigan is at risk of losing out on generous federal aid due to an inability to come up with required matching funds. In 2013 and 2014, the state will take millions from its general fund to secure federal transportation dollars. Furthermore, since gas taxes also fund pedestrian infrastructure and transit, a decrease in gas tax revenues is a problem for everyone, not just people who use roads.
And it's not just a Michigan problem. Other states are experiencing similar funding shortfalls and even the federal government's own 18.4 cent surcharge on gas has fallen short since 2005, when annual appropriations began to supplement an inadequate Highway Trust Fund (the federal tax hasn't been raised since 1993). Nationwide, it's become clear that transportation revenue rests on an increasingly broken funding model.
What isn't clear, however, is exactly what to replace it with.
In Oregon, Gov. John Kitzhaber signed into law on August 15 a bill that promises to eliminate gas taxes altogether. Starting in 2015, a new “vehicle miles traveled” fee will be levied on cars and trucks in the state. The program, which bills a motorist 1.5 cents for each mile driven, will begin with 5,000 volunteers (who will be exempt from the state's fuel surcharge), and will be expanded to all motorists once a system for collecting the fees is worked out.
A few challenges need to be addressed before a VMT tax can be implemented on a statewide or nationwide scale — for example, how to collect mileage information without infringing upon the privacy of motorists (Slate called a recent VMT study its "bad idea of the week" due to its use of “GPS-like tracking devices”), and how to exempt miles driven out-of-state or on private roads — and the fee would, like the gas tax, be fixed, and therefore still subject to erosion by inflation. But studies in San Francisco, Atlanta and elsewhere have shown that a VMT fee, if nothing else, causes drivers to be more conscious of the distances they travel and, consequently, drive less.
It also promises to solve another problem looming on the horizon: that more fuel-efficient cars — as much as we may like them — are also partly to blame for a decline in gas tax revenue as motorists continue to spend less on fuel overall.
Increasingly fuel-efficient vehicles — not to mention plug-in electric cars or those that run on alternative fuels — have come under fire from conservative lawmakers in recent years.
And that may be where the greatest impact of a VMT tax lies. Increasingly fuel-efficient vehicles — not to mention plug-in electric cars or those that run on alternative fuels — have come under fire from conservative lawmakers in recent years. In Michigan, State Rep. Mike Shirkey proposed a bill in April that would tax owners of hybrid or electric cars $75 per year. While not as blunt as Rep. Shirkey's suggestion, a VMT tax would also subsidize the owners of less efficient vehicles at the expense of those who drive more efficient ones. After all, gas taxes already, effectively, charge motorists based on how far they drive.
Though recently proposed by Gov. Snyder, an increase in Michigan's gas tax has proven itself to be politically difficult. Seemingly no one wants to support a tax increase, and some groups, like the conservative Mackinac Center for Public Policy, oppose such an increase on the grounds that a portion of gas tax revenues are spent on non-automotive transportation options.
Todd Litman of the Victoria Transport Policy Institute has researched ways to increase funding for mass transportation in the United States. In an email, Litman tells Mode Shift he is “pretty skeptical about a VMT tax,” citing “implementation costs [and] privacy concerns.” Instead, Litman suggests that gas taxes be raised and indexed to both inflation and the rising fuel-economy of motor vehicles. Robert Poole, a former federal transportation planner, echoes Litman's suggestion, writing in the Wall Street Journal that it would cause "an incentive for drivers to buy more fuel-efficient cars, creating a race to the top that will benefit both the environment and our energy independence."
While a VMT tax has not yet been proposed in Michigan, a recent Southeast Michigan Council of Governments study finds that a slight majority of area residents would prefer such a model. If Michigan's lawmakers are unlikely to approve either a gas tax increase, or (at least we hope not) Rep. Shirkey's dedicated tax on fuel-efficient and alternative-fuel vehicles, a VMT tax may yet emerge as a compromise that would provide much-needed funding to Michigan's roads as well as pedestrian and transit infrastructure.
Note: “Pay-per-mile” car insurance would also encourage motorists to drive less — but without the added side-effect of discouraging fuel-efficient or alternative-fuel vehicles (perhaps coincidentally, the first such insurance policy was also introduced in Oregon last year).