by James A. Bacon
While politicians dither about the need to replace the motor fuels tax with a Vehicle Miles Traveled (VMT) tax, usually on the grounds that tracking a car’s activity would create privacy issues, the private insurance industry has marched leap-years ahead.
Major insurers such as Allstate, State Farm and Progressive are offering auto insurance discounts to drivers who connect a device to their car’s computer system via a diagnostic port. In exchange for allowing the company to track driving habits — not location, but miles traveled, speed, braking behavior and the like — the insurers offer a price discount averaging 10 percent, and up to 30 percent, to qualifying drivers.
Randall Stross described his experience with installing such a device in his car for the New York Times. Logging onto the Allstate Drivewise website, he could view graphs showing incidents of “hard braking” and “extreme braking,” how many miles were driven in excess of 80 miles per hour, and the number of miles driven during different times of day. The devices could not track where he went or if he was exceeding posted speed limits.
The devices are gaining market acceptance, as insurers introduce the policies into more states. State Farm’s “Drive Safe & Save” policy is offered in Virginia. Progressive also offers its “Snapshot” policy in the state. Allstate’s Drivewise is not currently available here.
Mathew Brian explores the implications in the Atlantic Cities blog:
Car insurers have an incentive to charge people more who drive more, since those drivers are more likely to make a claim. In other words, insurers want to put a price on driving. That’s just another way of saying they want to put a price on gas. If this sounds like a backdoor gas tax that works in reverse, that’s because it is. It puts more money in people’s pockets for driving less rather than taking it out for driving more — which is a distinction without a difference. A disincentive to drive is a disincentive to drive. And disincentivizing driving is something with enormous spillover benefits — what economists call positive externalities.
Let’s add up the positive externalities. The Hamilton Project estimates charging by the mile would reduce driving by 8 percent nationally, which is roughly the same reduction an extra $1-a-gallon gas tax would achieve. Less driving means less oil used and fewer carbon emissions — 4 and 2 percent less, respectively. It also means less traffic and fewer accidents, which saves us another $50-60 billion (in 2008 dollars) or so. Those savings mean we save too — an average of $270 a year, skewed towards lower-income households that tend to drive less — since insurers will have fewer accidents to cover. That’s a lot of winning.
The primary objection to adopting a Vehicle Miles Driven tax is civil libertarian fears that government could track Americans’ every move. That fear assumes that cars are equipped with GPS devices to record the travel. But that’s not necessary. Cars could be equipped with a device like the ones insurance companies are installing that measure distance. Privacy issues disappear. Issues of administrative cost evaporate.
What is stopping us? Isn’t the prospect of reducing Vehicle Miles Traveled by 8 percent sufficient inducement? How many hundreds of millions of dollars in road, bridge and highway building projects would that save each year in Virginia alone? If politicians can’t understand any other language, maybe they can understand this: By shifting to a VMT tax and reducing VMT by 8 percent, they can avoid increasing the motor fuels tax — something nobody wants to do.
The General Assembly is gearing up to increase the gas tax in 2013? Really? How utterly, ineffably stupid is that?