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States Experiment with Controversial Taxes to Pay for Highway Construction

May 29, 2009 at 6:20 PM EST
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Some states are experimenting with controversial new taxes to pay for highway construction. Special correspondent Lee Hochberg reports from Oregon, where officials are looking into charging drivers a tax based on the number of miles they drive in lieu of a highly-debated gas tax.
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JUDY WOODRUFF: Now experimenting with controversial new
taxes to pay for highway construction.

Special correspondent Lee Hochberg reports from Oregon.

LEE HOCHBERG: Anyone who has driven the West Coast’s major
north-south highway, Interstate 5, knows this maddening half-mile bottleneck in
Portland, Oregon,
where the southbound roadway narrows to two lanes.

It’s needed to be widened since the 1970s. Finally, a lane
is being added, paid for with money from Oregon’s
gasoline tax, which funds 65 percent of the state’s road projects.

But, a year into the job, the amount of revenue available
from that tax is dwindling. State transportation spokesman Dave Thompson is
unsure Oregon
will be able to complete the interchanges needed to connect the widened freeway
to these feeder roads.

DAVE THOMPSON, Oregon Department of Transportation: That’s a
$90 million project. And the gas tax does not give us enough money to do that
at this point. We can’t even put it on our schedule, because we look out to see
where the gas tax will be in the next three or four years, and there’s not
enough there.

MAN: Yes, $10 regular, please.

Gas tax revenue plummets

LEE HOCHBERG: In Oregon, while miles driven have increased19 percent over the last 15 years, gas tax revenues have only gone up 3percent. That's because many are driving more fuel-efficient cars and buyingfewer gallons. Fewer gallons bought means less tax money brought in.

JAMES WHITTY, Oregon Department of Transportation: It isalready not performing right now. And where are we going to find the money tobuild projects like this or maintain the system?

LEE HOCHBERG: State manager of innovative partnerships andalternative funding, James Whitty, says it is only going to get worse.

JAMES WHITTY: And, in fact, we know that vehicles are comingthat will get 70 to 100 miles per gallon and vehicles that will use no fuelwhatsoever. So, the gas tax cannot last. It will fail. And it is failing rightnow.

LEE HOCHBERG: It's not just a state problem. The FederalHighway Trust Fund, fueled by an 18-cent-per-gallon federal gas tax, is alsorunning short. If that piece of the funding pie is missing, it could jeopardizecritical projects that the stimulus package hoped to get up and running.

Some members of Congress and Transportation Secretary RayLaHood have called for new approaches to funding. One they are looking at, andthe most controversial, is a mileage tax, where drivers pay for their milesdriven, instead of the gallons they buy.

It's a method Oregonexperimented with from 2005 to 2007. In a pilot project, 300 volunteers let thestate hook up computers and transmitters to their cars, so that their mileagein Oregoncould be tracked with a GPS, global positioning system. Only miles within Oregon were counted.

Each time they bought gas, their data was transmitted to thestate Department of Transportation, which calculated a 1.2-cent-per-milecharge, and added it to the gasoline bill. It replaced the old gas tax of 24cents per gallon.

The state says the program showed a mileage tax couldgenerate more revenues than what the gas tax would be expected to generate. Butthere were some issues raised. First, drivers who got more than 20 miles pergallon paid more in mileage tax than they would have in gas tax.

That happened to Lee Younglove, a 65-year-old retiree whotested the mileage tax for a year in his 2001 Subaru, which gets 25 to 30 milesper gallon. He paid 25 cents more tax per fill-up. But he says, it's only fairthat those who get better mileage pay more than they have been.

LEE YOUNGLOVE, 65-Year-Old Retiree: As I drive down theroad, I see some electric vehicles and some hybrids. I know they're not payingtheir fair share for maintaining the highway. In fact, for an electric vehicle,I don't know that they are paying anything for road-use taxes. So, they areusing the -- the highway for free. And, in my view, that's not very fair.

Mileage tax 'more fair'

LEE HOCHBERG: The state's report on the pilot project alsosays the mileage tax is more fair. It says: "These fuel-efficient vehicleswill be purchased largely by more affluent members of society. The lessaffluent will tend to purchase used vehicles, the minivans, SUVs and trucks oftoday." It asked, "Do we as a society want to place the bulk of theburden for funding our road system on the poorer element of society?"

Still, some think it's wrong to suddenly remove an advantageto driving a fuel-efficient car.

JOE BERTRAND, Motorist: A year ago, everybody was, you know,giving incentives for that. So, it just doesn't make any sense.

ESTHER WRIGHT, Motorist: I think those people should berewarded for being conscious and ecologically concerned. So, if they aregetting a tax benefit because they bought a Prius, for example, I think theydeserve to have one.

LEE HOCHBERG: Oregonwas the first state to tax gas back in 1919 to pay for its first road system. Thetax never was designed to encourage fuel-efficiency.

And Whitty doubts that it does today.

JAMES WHITTY: People will continue to buy fuel-efficientvehicles because of the price of -- of fuel, not -- not because of whatever thetax system is.

Privacy concerns a factor

LEE HOCHBERG: But the hit on fuel-efficient cars isn't theonly concern.

ACLU of Oregon executive director David Fidanque worriesjust how much information the GPS will collect and who will have access to thatinformation.

DAVID FIDANQUE, Executive Director, ACLU of Oregon: Any timetechnology is capable of collecting information, there are people who want thatinformation.

There will be tremendous pressure from law enforcement, fromintelligence agencies, because they're going to want to collect as muchinformation as possible about where motorists have been and when, because theywill be able to use that for all kinds of other reasons that have nothing to dowith the mileage tax.

LEE HOCHBERG: Some drivers are concerned about privacy aswell.

AUDREY NELSON, Motorist: I don't know if I would want someoneto know exactly where I was all the time and where I was going and what I wasdoing, though.

LEE HOCHBERG: In the pilot project, only total miles, notwhereabouts, were tracked. And no records were kept. Fidanque says, that'sgood. But that creates its own problem. How do drivers challenge the state ifthey disagree with the bill they get for mileage?

DAVID FIDANQUE: You won't have the ability to tell thegovernment: "Look, I didn't drive 600 miles, but I was charged for 600miles. The machinery was wrong. Give me a refund."

Mileage-based toll system

LEE HOCHBERG: The state says the technology in its trialworked exceptionally well. Its mileage readings averaged within 2 percent ofcar odometers, although, in some cases, they varied as much as 21 percent.

The state says improving the technology will not bedifficult. But some analysts say there's a much simpler way to raise the samerevenue.

John Charles is president of the Cascade Policy Institute, aconservative Oregonthink tank.

JOHN CHARLES, President, Cascade Policy Institute: All weneed is a very simple mileage-based toll collection system that is convenientin electronic tolls on the highest-used system, the interstate highways. Ithink a more modest system of user fees would get the job done. And it would beway more politically palatable.

LEE HOCHBERG: Charles says, 50 percent of U.S. driving is on freeways, so,they alone could be tolled and generate sufficient revenue. New in-cartransponders, already used in some states, can make billing easy.

And he says they can be programmed to charge more for peaktravel hours. But focusing on freeways raises worries that other roads willjust get more traffic, and they will need more repairs. Oregon officials are convinced a mileage taxis a better way to go.

JAMES WHITTY: And, so, there will have to be a new system. Iwould guess that the mileage fee is -- is the most likely possibility for thatnew system in the future.

LEE HOCHBERG: Making a mileage tax workable will requirehaving the technology embedded in new cars and depend on both automakers andthe federal government to buy in. Nobody is near there yet.

In the meantime, to keep the road fund from running empty, Oregon's governor isasking for a hike in the gas tax and a doubling in the price of auto title fees.