Taxing gasoline and road upkeep
In a previous article I wrote about gas taxes as a regressive tax. Most places that have gas taxes use them typically to pay for repairs and improvements on their state’s roads. Michigan is no exception, except that current gas taxes do not even come close to paying for roads and the rest of the money usually comes from borrowing or the general fund via income taxes. Michigan last raised the gas tax in 1997 and it’s easy to realize that that money didn’t keep up with needs then and certainly now 24 years later! With the likely steady increase in electric vehicles, gas taxes will be further reduced.
It might be time to explore a “miles driven” funding approach. According to the Federal Highway Administration, the average American driver logged 13,476 miles in 2014, the most recent year for which data are available. In Michigan, however, the average driver put 14,121 miles on their car in 2014. So we will use this figure for now since we don’t have any recent data as well as the datapoint that there are 3.2 million cars registered in Michigan to present my idea. Also recent estimates put the cost of fixing our roads at $2-billion per year.
1. Eliminate the gas tax
2. Place the sales tax on gas (which goes to schools) on the wholesale side of the equation rather than at the pump. Merchants can build it into the price at the pump to recoup
3. When cars are registered each year, they must do so in person and have their mileage recorded
4. When the car is registered, the mileage from the previous year is subtacted and the driver gets a bill, to be paid at least monthly for the road tax. (They can pay in a lump sum if they are able)
5. A mileage based approach would not only remove the regressive tax from those with lower income, it would doubly benefit them because being based on miles rather than gas used, lower income typically have older less fuel efficent cars and use more gas per mile than those drivers more well off
5. So as to not release personal information, the state treasury could create a progressive code scale and release this scale to the Secretary of State for each registered car’s owner which could be used by the SoS to offset the cost of the mileage bill. Example of a scale 1 to 10, with ten the lowest income, a driver who registers their car in that bracket would get a very minimal mileage bill where as a driver in scale bracket one is wealthy and pay the full cost of the mileage bill
So, just to ballpack the idea using available rough numbers assuming 3.2 million cars each driving 14,121 miles per year we get a total of 45,187,200,000 total miles driven on our roads. So just using cars as an example we divide the $2B by the total miles and get $.045 per mile (4–1/2 cents per mile tax). A car driving the year 2014 average would pay a fee of $635 dollars. If paid monthly, $53 per month.
The current gas tax in Michigan is as follows:
Michigan gas tax 18.7c
Federal fuel tax 18.4c
Again, move the sales tax and federal tax to the wholesale side. The sales tax 6% varies based on the total purchase and cost of the gasoline. Instead it could be a fixed cost per gallon like the federal tax.
To be sure, we’d be likely paying more. The current example totals yearly Michigan gas tax of $264 versus the mileage based one above. However, my scenario does not include trucking which would contribute to the pot.
We would also need to figure out how to tax tourists use of our roads when visiting Michigan.
Vehicles not registered in Michigan (rental fleets) would need some mechanism as well
Anyway, this was a brainstorming exersize. Feel free to contribute.