Oregon Tax Is a Drag on the Open Road
Would you volunteer for Oregon’s new experimental program to tax drivers by the mile as a substitute for the gasoline tax? I wouldn’t.
The state started testing this month a system in which drivers pay 1.5 cents per mile driven. Oregon hopes for 5,000 voluntary participants, each of whom will install in his or her vehicle what the state calls a “mileage recording device.”
The program, known as OReGO, is defended as necessary to make up for gas tax revenue that the state is losing as consumers shift to more fuel-efficient vehicles. The state’s gas tax of 30 cents a gallon pays for road maintenance, which is now suffering. Thus the change.
I generally prefer use taxes because, when properly designed, they place the cost of public goods on those who consume them. So why wouldn’t I volunteer for OReGO if I lived in Oregon? Let me offer four reasons.
First, the rationale is bizarre: The gas tax has successfully nudged people toward purchasing more fuel-efficient vehicles. Therefore we need to find a way to tax them as much as we did before they changed their habits.
But what kind of an argument is that? Suppose that high taxes on tobacco cause people to stop smoking. This will lead in the long run to lower collections of tobacco taxes. By design, the tax phases itself out. This makes sense. A tax imposed on a particular group for the benefit of others ought to be viewed as temporary. Once the group changes its behavior, there is no reason to transfer the punishment to someone else.
Yet that is effectively what OReGO does. The gas tax is aimed at drivers whose cars both pollute more and consume a scarce resource. As more Oregonians change their behavior, the number of miscreants becomes smaller. There aren’t enough drivers left to be taxed. So the state will tax mileage instead.
And look what happens. By the state’s figures, the annual tax for driving a hybrid Toyota Prius would on average increase by about 150 percent. The tax on the driver of a Ford F-150 light truck would decline slightly. By decoupling the driving tax from fuel efficiency, the program, at the margin, might reduce the incentive to purchase smaller cars.
Of course all so-called sin taxes, even if marketed to the voting public as a means of altering behavior, might actually be about extracting revenue from groups unlikely to garner public sympathy. (Such as the aforementioned smokers and gas guzzlers.) If this is so, then Oregon’s confession that it needs the money should perhaps be welcomed as a refreshing breath of bureaucratic honesty.
Nevertheless, I have a second objection to OReGO: the potential for invasion of privacy. True, the revised program isn’t as bad as it once was. As originally designed, OReGO required a GPS device, which would record the location of the car at every minute. After civil libertarians expressed concerns, the state added the option of an odometer reading device.
But it’s not much of an option. What I am able to glean from OReGO’s none-too-clear website, the GPS devices offer consumers more services. Perhaps more important, a user of the odometer device will be taxed on miles driven out of, as well as within, the state. So Oregon is hardly undertaking a natural experiment on revealed preferences.
Why is privacy even an issue? Because an important concomitant of the right to privacy is the right to anonymity. Nowadays, we tend to think of anonymity mainly as connected to freedom of speech. The U.S. Supreme Court has extolled the virtues of anonymous speech, and online the right is fiercely valued, if insufficiently guarded. But anonymity also matters in the larger world.
As my colleague Jed Rubenfeld has explained, “Anonymity is very different from privacy. Walking the streets, you’re not in private, but you may be anonymous if no one recognizes you. If you go into a store and pay cash for a book, what you’re doing isn’t private, but, again, you may be anonymous, and that anonymity might be very important to you.”
Driving is still a mostly anonymous activity. True, there are traffic cameras everywhere, making you easier to track down, and if you happen to use E-ZPass or its many equivalents, the state knows when and where you pay a toll. But there’s a world of difference between the driver who leaves a series of digital clues and the driver whose whereabouts are always known. The first can still be anonymous most of the time. The second can’t. I think my anonymity matters every bit as much as my privacy. Oregon doesn’t.
My third reason for opposition: As much as 40 percent of the revenue generated by the tax will go to the private vendors who operate the system on behalf of the state. According to the Organization for Economic Cooperation and Development, the usual cost of administering the tax system in the U.S. runs about 0.6 percent -- less than the OECD average of 1 percent, and only a tiny fraction of the cost of OReGO. Thus the mileage tax, at least as proposed in Oregon, would plainly flunk the economist Arthur Okun’s famous leaky bucket test, despite the supposed good uses to which the government promises to put the money. Small wonder Oregonians oppose the plan.
All of which leads to the final reason that I wouldn’t volunteer for Oregon’s experiment. The more volunteers, the more likely the state is to make the program mandatory -- and the more likely others are to copy this bad idea.
Oregon claims the right only to tax miles driven within the state. To do more would almost certainly be unconstitutional. But see below.
The leaky bucket experiment is described on pages 91-93 of Okun’s 1975 book “Equality and Efficiency: The Big Tradeoff.”
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