America has long paid for its surface transportation system with gas taxes. But while traffic demands have continued to increase, technological advances are changing the revenue equation: More fuel-efficient gas and diesel engines, plus an influx of hybrid and electric vehicles, means less revenue per mile traveled. The shortfall is readily apparent to all in the form of potholes spreading like a pox across the country’s deteriorating infrastructure. Recognizing this situation is unsustainable, federal and state policymakers are increasingly expressing interest in switching to a “road user charge” system (RUC) that uses technology to log the mileage of cars and trucks and charge them accordingly. As Congress debates surface transportation policy—and considers the merits of moving forward with an RUC system—it is important to dispel myths shaping the RUC debate, including that it would make rural drivers pay more and would threaten privacy.
On April 25, 2019, the Information Technology and Innovation Foundation held a panel discussion in the Rayburn House Office Building on Capitol Hill that delved into the myths and realities of RUC systems and what Congress should do to enable progress. At the event, ITIF released a new report, “A Policymaker’s Guide to Road User Charges,” that addresses this topic.
ITIF President Robert Atkinson opened the event by explaining how RUC systems work, as well as the sociopolitical issues around the implementation of the RUCs. Atkinson noted that, unlike the system of current indirect user fees, RUCs use one-way GPS signals that do not track location,. This would ensure better privacy than that of current methods like E-ZPass. RUCs also encourage people to drive more efficiently, which reduces their environmental impact. The shift to congestion pricing would also dramatically reduce congestion. He by urging Congress to include a nation-wide RUC pilot program that includes cars and trucks in the next surface transportation bill.
Susan Howard, Program Director for Transportation Finance at the American Association of State Highway and Transportation Officials (AASHTO) and Director of BATIC Institute, then discussed both the costs and benefits of RUCs. She noted that the current system relies on taxing gas in standard vehicles, and more efficient vehicles have made it more challenging for gas taxes to capture that use.
Howard also noted that higher administrative costs are a concern. Fuel tax collection costs 2 percent while RUCs could claim up to 18 percent of revenues in administrative costs. She also discussed how out-state travel must be considered, as the current state pilot programs look primarily at drivers only within state borders. She stressed that these pre-existing state pilot programs can be used as a tool to ultimately develop a national RUC program.
Then Senior Fellow for Eno Center for Transportation, Emil Frankel, explained how gas taxes no longer serve as an appropriate proxy for use of highway and road systems. Given the current political environment that does not greatly consider federal debt and deficit, Frankel noted that Congress will find ways to authorize programs in excess of user-based fees and draw more from taxpayers. He also emphasized that the prospects for RUCs are more promising at the state level.
Adrian Moore, Vice President of Policy at the Reason Foundation, then discussed broadly how technological change defines the issues of our time. It drives everything from elections to our transportation. Changing transportation funding methods is particularly challenging. Moore noted that there are immediate short-term political consequences, while the pay-off is years in the future.
Moore stressed that costs pose the greatest challenges, and RUCs could be steeper that gas taxes. Large-scale pilot programs are critical in the accurate determination of these costs. People do not understand how current gas taxes affect rural and urban populations. Mileage-based fees are more straightforward, so users will better understand the system.
Overall, the panelists agreed that the introduction of RUCs is a feasible solution to the current unsustainable gas tax policy. It is critical that the myths around mileage-based taxation are addressed in efforts to implement this sustainable new system.