A bipartisan group of senators has proposed indexing the gas tax to inflation. That would be an improvement over the current system, but it wouldn’t fix the structural problems with the gas tax. What the U.S. needs to do is adopt a vehicle-miles-traveled tax – and create the technological infrastructure for much more efficient transportation system.

The federal gas tax hasn’t been raised since 1993, and as a result its real value has been cut in half, requiring Congress to regularly top up the Highway Trust Fund. The gas tax was supposed to steadily fill the fund’s accounts, allowing Congress to allocate the money to new capital projects. The idea was for the heaviest users of the highways to bear most of the cost of their construction.

It hasn’t worked out that way. The Congressional Budget Office currently projects that the highway account will run a cumulative deficit of $113 billion between now and 2030. Two factors led Congress to the current predicament.

First, since George H.W. Bush’s defeat in 1992, Republicans have increasingly signed on to the idea that net taxes should never be raised. Democrats, meanwhile, say that they should be raised only on the rich.

Second, the popularity of SUVs in the 1990s and early 2000s drove gasoline consumption up faster than vehicle miles driven. So for the same level of highway usage, the federal government collected more money. That trend reversed itself in the mid-2000s, sending revenues into steady decline even as highway construction costs continued to rise.

The first of these problems would be solved by indexing the gas tax to inflation. The tax would rise automatically without Congress having to take politically difficult votes every few years.


The second problem, however, will only accelerate as Americans increasingly adopt hybrid and electric vehicles. The federal government estimates that gasoline consumption will decline 20 percent by 2050 – and that’s a conservative guess.

The most effective way to combat this would be with a VMT tax. The tax would act as a sort of continuous toll, charging a car’s owner for each highway segment they drive.

The primary concern with such systems is privacy. Setting up tollbooths along every stretch of interstate would be inefficient and provide a huge enforcement challenge. An alternative would be to track the vehicle using GPS and then transmit that data to a central database for billing.

That might sound dystopian, especially if the database were operated and owned by the government. Yet most Americans don’t think twice about carrying mobile phones that allow Apple or Google to continuously log their location. If car owners were allowed to choose their billing provider, that would provide an extra layer of insulation.

Most people would probably sign on to a major tech platform that provided all the equipment necessary for tracking for free. Those who wanted more privacy could opt for niche providers with automatic data deletion procedures and an army of lawyers designed to thwart any potential subpoena.

This type of arrangement would allow states and even municipalities to raise funds based on actual road usage. In particular, it could allow for automatic congestion pricing on crowded highways or within the central business district. It could even allow for variable-rate street parking or for retailers to rent their parking spaces to non-customers. This type of constant metering is one way to deal with the endless congestion and constant search for parking that plague many urban areas.

No matter what the solution, however, the U.S. has to move on from its antiquated system of financing transportation infrastructure. Indexing the gasoline tax to inflation is better than nothing – but if Congress really wants to tackle the problem, it needs to seriously explore a national VMT tax.

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