Taxes by the Mile

by on March 26, 2006 at 7:30 am in Economics | Permalink

Fuel-efficient vehicles are cutting into gas tax revenues.  As a result, some states are  experimenting with per-mile tax systems.  In Oregon, an experimental system uses GPS to monitor how many miles a car drives.  Drivers are then charged an appropriate road tax when they fuel up.

In this case, leviathan’s hunger has some benefits.  The current system breaks miles down into rush hour and non-rush hour which allows for improved congestion pricing.  But more generally, there is no reason why the tax, insurance and road pricing systems cannot be fully-integrated.   Aaron Edlin and Pinar Karaca-Mandic point out
that tort law does not fully internalize accident costs.  A fuel tax
helps but since the externality is
per-mile not per-gallon a per-mile tax is more efficient.  Insurance by the mile is also more efficient than the current system which subsidizes heavy users.  Finally, GPS can be used to price by the road and not just by the time of day.  Indeed, as pricing by the mile/road becomes more common, the idea of private for-profit roads will no longer seem so radical.

Comments on this entry are closed.

Previous post:

Next post: