Penny Lane, Literally: Funding Roads One Vehicle Mile at a Time

Abstract

The federal government and all fifty states tax motor fuels to generate revenue for roads, bridges, and highways. Unfortunately, motor fuel taxes are an increasingly unsustainable source of revenue as fuel efficient hybrid vehicles and completely electric vehicles grow in popularity. Accordingly, states must search for alternative methods of collecting revenue that encompass two important principles of the gas tax. Ideally, this new revenue source must be both easy to collect, and be based on a “user pays” principle, meaning the tax is proportional to an individual’s use of the roads. Oregon, the first state to implement a fuel tax, recently launched a pilot program to test the vehicle-miles traveled (“VMT”) tax in lieu of a tax on motor fuels. Under a VMT tax, drivers who voluntarily opt into Oregon’s new program pay a certain number of cents per mile traveled rather than pay the gas tax. This program, which the Oregon state government calls “OReGO,” is that state’s newest attempt to create a sustainable source of revenue for the road fund. This Article examines OReGO and ultimately suggests that other states seriously consider drafting similar road funding programs. The Article also identifies ways that Oregon and other states could improve upon the OReGO model, including measures that address environmental concerns and that ensure the tax adjusts to inflation. A sustainable VMT tax will eventually need to become mandatory, and coordinated at a regional or national level as multiple states adopt similar taxes. With these adjustments, VMT taxes could be a promising funding solution for states faced with falling revenue from the outdated fuel tax.

Keywords: Oregon, roads, funding, Fuel tax, vehicle miles traveled, state taxation, road funding, tax policy, OreGo, environment, sustainability