Friday, October 8, 2010

Tax on Vehicle Miles Traveled Gains Support, but Raises Orwellian Questions - SA's DOT plans something similar

The good thing about having a Google alert is that you also get to see stories that you never intended to receive in the first place. I just came across such a story, that of Tax on Vehicle Miles Traveled (VMT) which is being proposed in the USA and some European countries - a tax charged to motorists based on the kilometers traveled instead of the fuel consumed by the vehicle. Its an interesting topic that its supporters think will solve the problem of depleting revenue from fuel tax. For those criticizing the plan, points that this depleting tax revenue are as a result of increased fuel efficient vehicles and the VMT will encourage more people to drive vehicles that emit more pollution as put by a columnist Glenn Reynolds;

"Gas taxes are a pretty good proxy for road usage -- the more you drive, the more gas you burn -- and there's a bonus: Gas taxes encourage people to use less gas. ... A mileage tax, presumably, doesn't care whether you're driving a Prius or a Hummer, giving no incentive to save."

To address the concerns mentioned below, a final report by the National Surface Transportation Infrastructure Financing Commission said new technologies could allow for a mileage gas tax that would take into account the type of vehicle and level of emissions. Such programs of that type are being developed in other countries, including Germany and the Netherlands, the report said (1).

Here at home, the National Transport Master Plan 2050 (NATMAP), through its FILM (Finance, Institutional, Legal and Management) of which I was lucky enough to be part of suggest we follow something similar here in SA;

“Within 5 years to develop a revenue collection design, funded through user pay methods, acceptable and visible to the public, that ensures a flow of revenue sufficient to annually maintain, preserve and improve highway and road system” - Page 31

It goes further and says;

Internationally, traffic congestion is costing countries a lot. On the other hand high international fuel prices increase pressure on fuel levies as an acceptable source for infrastructure spending. It is therefore time to move towards “Variable User Charging” (VUC) to capture externalities like congestion, air pollution, greenhouse gas emissions and safety.

Once the NATMAP bill becomes an Act, we may as well start preparing ourselves for tax based on how you drive and not how much fuel you consume. How that will be done may not necessarily follow what is being proposed in the NATMAP but how its going to be implemented is something interesting to watch.

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