2009.10.27
Taxes, tolls and GPS
Some pretty out-there ideas are being floated to help generate revenue for transportation. Bob McDonnell wants to put up toll booths at the state borders. Other, more serious proposals include installing GPS devices in cars and making drivers pay per-mile for certain segments of roads.
In an editorial we're working on for later, we'll argue that, though it is far from perfect, the gas tax is a far more efficient way to pay for roads - at least for now. That may change as cars get super-efficient and hybrids and purely electric cars become more common.
When that happens, the gas tax may not work, and these schemes might merit more serious consideration. Before that day comes, a lot of thought needs to go into the drawbacks and privacy implications of having the government track your car's every move in order to properly assess transportation fees.
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Geez! Government GPS is a more serious proposal than tolls? LOL! The Northeast already effectively uses tolls for its major thoroughfares now. Anyone taking I-95 North from DC knows this. You can get electronic readers (i.e. EZ Pass) that allow you keep from having to stop at the tolls.
Actually, I'm surprised any candidate got it right, but McDonnell's usage based tolls are the right way to handle this. He should go one step further and suggest using government spending cuts to pay for roads.
Comment by Jim — October 27, 2009 @ 4:19 pm
What makes more sense- a gas tax that based on an energy foundation that America is committed to reduce or a toll based on actual usage regardless of how many miles per gallon you get in your vehicle.
But, because the toll plan comes from McDonnell that makes it already a bad idea. Nevermind that the state of Ohio does it this way and it works for them (google Ohio turnpike).
What is Deeds plan? You know, that guy the RTEB endorsed for governor. His plan (and you really have to stretch the definiton of the word plan to call this one) is to form a committee to study it and make recommendations. Sounds like he is running for Roanoke City Council more than he is running for governor.
But, he is the democrat.... So, X marks the ballot for the RTEB....
Comment by Bob H — October 27, 2009 @ 4:26 pm
I remember mentioning this several times through the plethora of transportation threads. The state of Oregon did a study of such a VMT system and may have actually run a trial program for a while...I'm not completely sure...many of the old links I used to research it I can no longer find. In general, I think the concept holds merit. In reality, the privacy concerns may be what prevents it from ever becoming a viable method of revenue generation.
Comment by Other John — October 27, 2009 @ 4:53 pm
Bob,
This editorial is not about McDonnell or Deeds. McDonnell is only mentioned incidentally because of his position on tolls. The proposal for GPS monitoring doesn't come from McDonnell. It's a joint study by the federal and state departments of transportation.
Not everything is about party - however hard you try to make it so, or however much you want to think we try to make it so (psychologists call that projection).
Comment by Dan Radmacher — October 27, 2009 @ 4:57 pm
Bob/Jim...I beleive Federal law prohibits any state from arbitrarily placing tolls on existing interstate highways that are toll-free...because of funding stipulations and the associated limitations on how the roads can be used. If tolls were originally part of how they were constructed, then that's a different matter. So quite simply, what McDonnell proposes is not feasible, legal, nor will it ever be implemented as a way to fix the funding solution. It's all hot air and lies.
Comment by Other John — October 27, 2009 @ 4:59 pm
Ok, I got a bit of additional information...tolls can be raised, but their proceeds can only be used on the road for which the tolls are collected. So, based on that. I think what McDonnell has proposed would be legal...though how that would impact the existing funding streams for the I-85/95 maintenance and construction...I'm not sure. I have a feeling that the revenue from the Feds would be cut if the state were generating revenues with tolls...but I cannot find that in the boatloads of federal guidelines I've read through.
Comment by Other John — October 27, 2009 @ 5:02 pm
OtherJohn, that's government-made bureaucracy, and the economic principle still applies that a usage-based tax is the most efficient. Laws can be changed and even highways can be sold. We shouldn't be bound by some artificial parameters. If what you say is true, then charging fees through a GPS unit while on a Federal highway would be illegal and therefore irrelevant.
Now how does this work for I-95? If the state owns the bridges, then it can charge tolls there as is done in DE on I-95? I say eliminate Obama's czars and use their salaries to pay for some maintenance.
Comment by Jim — October 27, 2009 @ 5:15 pm
Funding for VDOT was last raised, by a penny per gallon in 1986. The inflation calculator indicates the 17.5 cent tax is now worth a little less than nine cents.
VDOT maintains 57100 miles of road.
It takes a minimum of 3 cents per mile per gallon per car to build and maintain roads. The current tax is less than 1 cent per mile.
The gas tax is a true user fee - the more miles you drive, the more you pay - and everyone pays essentially the same rate.
Almost no region has a big enough population base to pay for its own roads. A single mile costs between 5 and 8 million dollars to build.
That means between 500 million to 800 million car miles to fund one mile of road.
Tolls are expensive to collect, and provide less revenue for transportation than the gas tax. a $2.00 toll for a single year for a 260 day work year is more than 500 extra dollars beyond the gas tax. Add to that the fact that tolls put a considerable burden on regional populations, adding to the cost of shipping, commuting and everyday business.
The gas tax, which is the ultimate user fee - the more you drive, the more gas you use, therefore the more tax you pay, is diffused and spread across all of the road users or gasoline users(gas has to be delivered, so that journey uses the highway system - for those claiming lawnmower and farm tractors pay a tax for something they don't use) making the burden for building and maintaining the state highway SYSTEM low enough that everyone can afford to drive on it.
Unlike the gas tax, tolls are concentrated collection points that add real life burdens to those who must pass a toll booth everyday to get to work.
Double the gax tax the average driver would pay to fill up once a week for 52 weeks a total state gas tax of $364 dollars or about a dollar a day -less than the cost of cable, or a cell phone
When a man receives a free lunch all his life, you can bet the farm he will resist with all his might any attempts to make him pay for what he consumes. And for thirty years Virginians have been getting a subsidized "lunch" because the cost of driving on the road has not kept pace with the cost of maintaining and building those roads.
Comment by joe Mostowey — October 27, 2009 @ 10:21 pm
Other John wrote "Ok, I got a bit of additional information...tolls can be raised, but their proceeds can only be used on the road for which the tolls are collected."
One other caveat - SUBSTANTIAL renovation or repairs must be done to the road to justify a toll, one cannot just up and erect toll booths on the federal roads.
Comment by joe Mostowey — October 27, 2009 @ 10:24 pm
OK, now let's discuss Deeds' idea for transportation.
Oh, that's right.
Comment by Suzie — October 27, 2009 @ 10:44 pm
Bob " Mickey-D you can have it for free - No Taxes! " McDonnell has a plan?
Bwhahahahahahahahahaha!
Micky-D has posted no viable plan, (and anyone who looks at what he has posted laughs their head off at the idiocy of it) just a promise of no tax increases, so as to allow the freeloading GOPer keep riding for free
Comment by joe Mostowey — October 28, 2009 @ 8:19 am
@Jim in 7, 'OtherJohn, that's government-made bureaucracy, and the economic principle still applies that a usage-based tax is the most efficient.' Thank you for illustrating why the fuels tax is probably the best, least impactful, but most relevant way of raising revenues...it's fairly closely correlated to highway/roadway usage and it's darn hard to dodge paying it, whereas tolls can be avoided with detours, and there are numerous state and federal matters that would have to be resolved before they could be implemented.
Comment by Other John — October 28, 2009 @ 8:31 am
So if two vehicles travel 100 miles each and one gets 20 MPG and the other gets 30 MPG how is that a fair distribution of taxation for using the roads? Sure, if everyone got the same MPG then those that drive more, pay moer however that's not the case.
How about the non-residents (both car and truck) that travel through parts of the commonwealth and don't purchase gas? How are they paying for the road they are using?
Comment by Richard S. — October 28, 2009 @ 11:34 am
@13 I'm comfortable with those two vehicles paying different amounts for the same distance. A vehicle with lower mileage tends to produce more greenhouse gases. It also tends to be heavier and therefore cause more wear on the highway. Those costs are offset in part by the fact that they pay more in taxes by consuming more gas.
Comment by C. Trejbal — October 28, 2009 @ 11:49 am
@ Richard in 13, I've never said the gas tax was perfect...but it's probably the best way to raise revenues at this point in time. Later on, some for of tolling, be it physical toll booths or vehicle GPS tracking, is probably going to need to be implemented. The problem with tolls is they cost a ton of money to construct, maintain, and operate. Plus, many drivers will actively seek ways to avoid the tolls if they percieve the increase in time to complete a trip to be worth skipping out on the toll. The other negative with tolls is that when those drivers seek alternative routes, that pushes vehicles onto local streets not well equipped to handle the traffic. My analogy is like when 81 has a truck wreck, Route 11 gets slammed. Now a toll won't be that bad, but it illustrates the point that drivers will look for the path of least resistence. If they see an onerous toll as a point of resistence, they will seek to avoid it. The VMT-tax using GPS would be the best way to accurately tax drivers for their actual use of roadways, because the actual mileage driven would be collected and taxed accordingly. Mileage would not be a factor at all, and the taxes could be rated based on the vehicle size (like tolls) to base the tax on the vehicle's relative destructive capability on the roads (semi trucks weigh more, therefore tax them higher...as an example). The problem, aside from privacy issues abound, would be how to process the data and assess the tax. Do you divvy the miles up by jurisdiction, by state, or where the driver lives? If you split it by state, then the tracking/calculations on it get nasty for a lot of folks like long-haul truckers, people who travel with their personal cars, etc. Then, the issue of collections. Gas taxes are automatically collected at the time of purchase. A VMT tax would likely have to be assessed through either a bill, or some sort of a system similar to EZ Pass, where you have the account linked to a credit card or other account from which to make payments from. Now how would you guarantee that drivers keep the device in the car? Would there be a Federal program to install these devices in all new cars and retrofit older cars with them? How would that be enforced...yet another problem. So, like i said, at this point, the gas tax is probably the best way to do it, and most fair, given the alternatives and all their inherent problems. Of course we could just do away with all transportation taxes and just start monkeying further with income and sales taxes, but then we're taxing people who don't use the roads to fund road work...so that probably would not fly either.
Comment by Other John — October 28, 2009 @ 11:52 am
Thanks C, I neglected to mention that point...but it's relevant. A good example can be found in my driveway. I drive a little 4-cylinder Acura Integra that gets about 32 MPG, and it also weights only about 2600 pounds. My wife's V6 4WD Escape gets about 20 MPG, and it weighs about 3600 pounds. That extra weight adds additional wear on the roads, costing more money...so the higher taxes levels out. When roads and bridges are designed, they are designed using the concept of ESAL's, which stands for equivalent single axle loads. Basically, one ESAL is equal to a loading of 18,000 pounds, which is roughly what each of the load-bearing axles of a fully-loaded tractor trailer carries. Small cars weigh less and impact the road less, large vehicles weigh more and have higher impacts. That's a big part of why the tolls on turnpikes, the CBBT, and other facilities are just a few dollars for a car, but in the $20+ range for large trucks.
Comment by Other John — October 28, 2009 @ 12:00 pm
#14 ?
I thought this was about $ for road construction? What does greenhouse gases have to do with that?
Identify how much $ is needed, pass the gas tax, and once that anount has been collected, the tax immediately stops and cannot be continued without a statewide voter approved referndum. I can live with that.
Comment by Bob H — October 28, 2009 @ 12:12 pm
Other John #15
I agree that nothing is perfect but whether perfect or imperfect a tax never goes away. As has already been mentioned how do you figure in the governments new requirements for higher mileage cars? The more mileage per gallon the less tax they pay so the less revenue. Every where you turn the Dems are screaming for the production of hybrid and electric vehicles to save the planet. Those too decrease the need for gasoline and again, decrease the potential revenue from a gas tax.
If your in favor of an increase in the gas tax are you in favor of it at any level? How about $1 a gallon, is that OK or is there a limit in your mind?
Comment by Richard S. — October 28, 2009 @ 12:45 pm
Bob, you don't quite get it. Roads are not a buold and leave item. You have to maintain them continuously, and as they age, repairs get more costly. Construction projects also have to be done incrementally, so the only sure-fire way to do it all adequately is to have a continuous funding stream, not one-time allocations or temporary funding sources that phase out over time.
Comment by Other John — October 28, 2009 @ 12:56 pm
Honestly Richard, for right now, I think the state tax needs to be in the 25 cent per gallon range or so, because my math indicates that it would restore the budgets to where VDOT can adequatley keep up with maintenance and move some needed construction projects along. In the future, I don't know what may be needed. Perhaps for a lot of the hybrids or pure electric vehicles, they will figure some way of making up for the loss of fuels tax revenues in other ways...I don't know. For today, the fuels tax makes sense, as imperfect as it is. In the future, it will be a lot less relevant and a lot less capable of producing adequate revenues. At that point, somethine else will be needed. If there were a voluntary VMT program here where you could get your fuels taxes reimbursed and replaced with a VMT tax, I'd go for it and give it a try. I don't drive like a moron, and given the prevalence of existing surveillance methods, I personally would not have a problem with having a GPS unit in my car keeping track of my miles driven. I think there would need to be a ton of safeguards and restrictions placed on what data got uploaded for taxation purposes...limited to just mileage, but I'd be ok with giving it a whirl and seeing how it worked.
Comment by Other John — October 28, 2009 @ 1:09 pm
Bob H, the gas tax doesn't even provide enough money now for routine maintenance and repair. For instance, hundreds of bridges in Virginia are in terrible shape or will be in bad shape soon because there's been no money for repairs. We're not just building new roads withy this money.
Comment by gdad — October 28, 2009 @ 1:26 pm
Had the gas tax simply been pegged to inflation, it would be about 33 cents a gallon - which would cover a good portion of the annual shortfall, if not all of it.
Comment by Dan Radmacher — October 28, 2009 @ 1:28 pm
Dan, it would probably cover it all. Many weeks ago, I slogged through state budget and VDOT budget sites and crunched the numbers, and a tax in the 25-30 cent range would cover the projected annual shortfalls in funding that VDOT is now dealing with. And had it been implemented, no one would really be complaining about the tax today, it would still be comparable to most neighboring states, and our roads would be in far better condition today too. But, maybe this explains why so many conservatives love the big trucks and SUV's....you need one to handle all the potholes and rough roads caused by their insane reluctance to boost transportation revenues.
Comment by Other John — October 28, 2009 @ 1:39 pm
I guess I am confused. I was under the impression that the gas tax was being touted as the way to pay for much needed improvements to our infratructure.
Now it is all about covering the "annual shortfall"? Make up your mind!
With regards to the projects and aforementioned needed improvements to our infrastructure (which, if you read enough RTEB editorials about you will become firmly convinced that the state will have to shut its borders within a few years if they are not done) what is wrong with identifying the projects, the costs, and then making the tax end as soon as that amount is collected? Other than bringing some responsibility into the equation and not giving the govt. a blank check with our money?
What opposition is there to that thought?
Comment by Bob H — October 28, 2009 @ 1:45 pm
Bob, to explain this, again, let me try this one more time. The gas tax historically funded the bulk of all roadway construction and maintenance in Virginia in terms of state allocations. Due to inflation, outsourcing, and increases in property values...the current gas tax cannot cover the expenses of constructing new roads and maintaining the ones we already have. As a result, the gas tax needs to be increased to keep pace with the cost of running the state's road network. Does that help?
And, due to construction cycles and the size of most projects, levying small temporary taxes for each project would be onerous, overly complicated, and generally a frustrating ordeal because they would each have to run through the GA to be approved. The gas tax, on the other hand, eliminates most of the headaches and just streamlines the process of levying and collecting the tax, and therefore funding transportation.
If we were talking about funding a huge $3-4 billion project like the 3rd crossing in Hampton Roads, then the temporary tax would make a lot of sense...or tolls. But for the more mundane things like paving, gravel replacement on backroads, ditch cleaning, bridge patching, and the like...the gas tax works better.
Comment by Other John — October 28, 2009 @ 2:16 pm
What happened to the $1 billion dollars that Governor Warner convinced the General Assembly to raise in taxes? I thought that was supposed to fix the problem, yet the farmer from Bath says we need another annual $1 billion. What is it with Democrats, taxes and $1 billion?
Comment by Glen Franklin Koontz — October 28, 2009 @ 3:53 pm
That was to make up for the mess left by the last Republican governor - the $1 billion car tax giveaway. It had nothing to do with transportation.
And, OJ, good explanation on #25.
Comment by Dan Radmacher — October 28, 2009 @ 4:01 pm
Dan Radmacher:
Oh no, because after the tax increase, surprise, surprise, there was a $1 billion surplus.
Also, Warner did not claim that taxes had to be raised to cover the car tax cut; he claimed it was needed for transportation. WHY DID IT NOT GO TO TRANSPORTATION?
Comment by Glen Franklin Koontz — October 28, 2009 @ 4:24 pm
You are mistaken, Mr. Koontz. Warner did not say the tax increase was needed for transportation. That is simply incorrect. It did not go to transportation because it was not meant to go to transportation.
Oh, and where's that surplus now?
As knowledgeable officials said at the time, that temporary surplus was based on extremely volatile sources of revenue, mostly produced by the housing bubble.
Comment by Dan Radmacher — October 28, 2009 @ 4:27 pm
Dan, all of the editorials you have written have been about the infrastructure. The maintenance of existing roads is not improving of infrastructure.
I don't know how I can make that any clearer.
Comment by Bob H — October 28, 2009 @ 4:34 pm
#23 Other John Wrote "Dan, it would probably cover it all. Many weeks ago, I slogged through state budget and VDOT budget sites and crunched the numbers, and a tax in the 25-30 cent range would cover the projected annual shortfalls in funding that VDOT is now dealing with. And had it been implemented, no one would really be complaining about the tax today, it would still be comparable to most neighboring states, and our roads would be in far better condition today too. But, maybe this explains why so many conservatives love the big trucks and SUV's....you need one to handle all the potholes and rough roads caused by their insane reluctance to boost transportation revenues."
-----------------------
Inded that would handle the current shortfall, But VDOT's current budget crisis is predicated on a "holding" budget, one that allows no real progress in rebuilding deficient bridges, nor expanding the interstates, like 64 and 81 to enough lanes to handle the current traffic loads, let alone projected traffic loads.
Nor would it begin to allow the elimination of dirt and gravel roads that should have been upgraded to pavement back in the 1960's -almost 30 years after the majority of them were taken into the system under the byrd act.
Under the current government mentality, much of the rural secondary system is slated to fail, as it cannot be upgraded to meet minimum VDOT standards.
Comment by joe Mostowey — October 28, 2009 @ 4:34 pm
Dan Radmacher:
How was that tax increase even remotely connected to the "housing bubble"?
And does it not strike you as odd that there was a need to raise taxes, but after raising the taxes by $1 billion, there was all of a sudden a surplus in the same amount?
Richmond has plenty of money. It does not need anymore.
Comment by Glen Franklin Koontz — October 28, 2009 @ 4:44 pm
@Bob H #30: Dan, all of the editorials you have written have been about the infrastructure. The maintenance of existing roads is not improving of infrastructure.
I don't know how I can make that any clearer.
Bob, it's perfectly clear. It's simply incorrect. Our editorials always discuss Virginia's "transportation needs." The state's needs include both ongoing maintenance and new construction to keep up with growing demand.
In addition, maintaining existing roads - especially after a period of neglect - certainly is improving infrastructure.
Comment by Dan Radmacher — October 28, 2009 @ 4:45 pm
@GFK #32: How was that tax increase even remotely connected to the "housing bubble"?
The tax increase was not. The surplus was the result of upswings in three areas of revenue: real estate transactions, corporate income taxes and investments. Those sources have all declined, along with most others, making the surplus disappear.
Comment by Dan Radmacher — October 28, 2009 @ 4:56 pm
Dan Radmacher:
I do not think that you can make that case. The tax revenues of $1.5 billion (I have unintentionally been lowballing it, sorry) were collected from taxpayers. The tax increase was predicated largely on increases in the sales and cigarette taxes, which maintain no connection to the "housing bubble"--a "bubble" which only burst in 2008, 4 years following the tax increase.
The surplus was spent by the state government. On education, mainly. All monies collected by government are spent. That is what government does.
The problem with revenues are not the result of the housing bubble per se; rather, the problem with revenues is that there is too much government, too much taxation and too much spending. The taxpayer is spent out. We need to be left alone.
Comment by Glen Franklin Koontz — October 28, 2009 @ 5:28 pm
Glen,
I'm afraid your facts - or your recollection - continue to be incorrect. Again, the surplus was mostly due to collections above estimates in real estate transfers, corporate income taxes and taxes on investments.
Those are simple, verifiable and unassailable facts.
The 2004 tax increase - passed back when there were still some Republicans in Richmond who cared about sound governing more than sound bites - repaired structural imbalances in Virginia's budget that threatened the state's bond rating. The transitory surplus was unrelated to that tax increase.
Comment by Dan Radmacher — October 28, 2009 @ 7:20 pm
Dan Radmacher:
If the government was not ruining the economy through its regulatory and taxation policies, we would still be collecting above estimate revenues in corporate income taxes and taxes on investments. But when the government ruins the economy, it ruins it for everyone, including government.
Comment by Glen Franklin Koontz — October 28, 2009 @ 7:39 pm
Nice diversion from admitting that your facts were all wrong.
What regulatory and taxation policies changed between the good economic times and the bad, Mr. Koontz? GWB cut taxes. The result? The most anemic recovery on record with the fewest jobs created and the first decline in actual income for the middle class over the entire course of a recovery.
Comment by Dan Radmacher — October 28, 2009 @ 7:51 pm
My facts were not all wrong. Your facts were not all correct.
And you want to experience the most anemic recovery? According to the federal government, we are in it. According to barack hussein obama's administration, 10% unemployment is the new normal.
Taxes are up, there are plans to raise them more. Spending is out of control, the government's policies portend a fascistic system not seen since the 1930s, and the President spends every day demonizing one industry or the other. AND this has been going on since 2007 when the Democrats took over the Congress.
If government spending, taxation and control were the route to prosperity, the Soviet Union would still exist and be a paradise. It doesn't and wasn't.
Comment by Glen Franklin Koontz — October 28, 2009 @ 8:22 pm