How Oregon is Beating the Gas-Tax Dilemma

Oregon's tax-per-mile pilot exceeds gas-tax revenue earnings by 28% and equips people to adjust driving behavior in response to their expenses

As I write this column in mid-July, the U.S. Congress is preparing to slap on another Band-Aid that will keep federal transportation funding limping along until May. The House has just passed a $10.9 billion extension of the highway bill through May 2015, a measure aimed at averting cutbacks in August in federal money for road, bridge and transit projects.And the Senate is poised to follow suit.

Another short-term extension for a problem that desperately needs a long-term solution.

Of course, the real problem with transportation funding is the 18.4-cent-per-gallon gas tax that supplies most of the Highway Trust Fund's revenue. The tax has been stagnant since 1993 and has struggled to keep pace with increased infrastructure expenses as cars have become more fuel efficient, creating a $16 billion per year deficit.

An article on illustrates one example of a state beating the gas tax problem. For the last decade, Oregon has been on the cutting edge with its evolving pay-per-mile road funding program.

A new report from the Oregon DOT summarizes the policy steps that took the state from the realization in 2001 that the gas tax was no longer going to be a viable option in the future to the passage and pending implementation of the country's first mileage-based funding system in 2013.

There’s a lot of flexibility in the Oregon program. For example, there are several options for how people are charged. Oregon learned that some people don’t appreciate the government tracking all the mileage they drive. So the state offers five levels of mileage-based payment options, from a simple odometer reading to precise GPS monitoring via smartphones.

The program itself is also flexible. Oregon's pilot system charged drivers 1.56 cents for every mile they drove, the idea being that cars place a direct stress on road infrastructure. But the fee rate can be adjusted to charge more money to heavy trucks that cause more damage to roads. Or it can be adjusted to charge more money for cars driving during rush-hour, serving as a congestion deterrent as well as a funding mechanism.

And, best of all, the system seems to do a better job generating road funding than the gas tax does. The Oregon DOT reports that revenue under its pilot program exceeded expected gas tax earnings by 28%.

As the author of the article notes, the best thing about the program is its ability to change the way Americans think about the cost of driving.

“In a mileage-based funding system … drivers would receive monthly statements showing their driving activity and road expenses. The entire funding system becomes more like a utility — enabling people to adjust their behavior in response to their expenses,” writes Eric Jaffe. “In other words, people would think more proactively about their road consumption.”

That’s the type of shift in thinking we need.