No Reason Left to Oppose Shift to a VMT Tax

No brainer

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.

Source: The Hamilton Project

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?

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17 responses to “No Reason Left to Oppose Shift to a VMT Tax”

  1. Not driving is a positive externality. Not owning a car is a positive externality. Not owning a home is a positive externality. Not having a job is a positive externality. Not having a family is a positive externality. The only problem with externalities is that eventually someone else pays for them.

  2. reed fawell III Avatar
    reed fawell III

    This is a very slippery slope indeed.

  3. DJRippert Avatar

    “The General Assembly is gearing up to increase the gas tax in 2013? Really? How utterly, ineffably stupid is that?”.

    The only thing stupider would be to do nothing while debating the possibility of a VMT!

    Index the gas tax to inflation now.

    Implement a VMT in lieu of indexing the gas tax whenever the General Assembly can manage to get that done.

    Perfect is the enemy of good.

  4. DJRippert Avatar

    See Jim, your problem is that you have all these clever ideas (and most of them are, indeed, clever). However, you want a hidebound state government to implement your clever ideas. The only state where the sitting governor can’t run for a second consecutive term. The state with the least competitive elections for the state legislature. Most difficult state in which to get on the ballot. No term limits for the legislature. No citizen referenda. No recall elections. Strict Dillon’s Rule. Practicing lawyers in the legislature voting for the judges who will adjudicate their cases. One of the worst Gerrymandering offenders. And on and on.

    Now you want to discuss a VMT? Really?

    I can’t decide if you are naive or on an intentional effort to stop the indexing of the gas tax to inflation by proffering a suggestion you know will never see the light of day.

    I don’t cat about the New York Times, I don’t care about Allstate or State Farm, etc. They are not controlled by our General Assembly.

    Get real, Jim.

    1. This is the most insightful, most concise, and most accurate assessment I have ever read about Virginia’s governance.

      Well done!

  5. Our General Assembly from rural Virginia is going to require their rural constituency to put a govt tracking device in their car?


    Hells Bells – RoVa won’t swallow an index tax and we think they’re going to go for govmint tracking devices? Holy Moly!

    1. DJRippert Avatar

      If rural Virginia controlled politics in the state then Virginia’s 13 electoral votes would have been cast for Romney. If Virginia joined the rest of the states and held state government elections on the same day as the national elections (instead of a year later) the politicians from rural Virginia wouldn’t matter.

      However, there may be help on the horizon. Cuccinelli is such a lightening rod for controversy he might just bring out the vote next November. And if he does, Katy bar the door. The RPV will lose the governor’s mansion, the House of Delegates and the Lt Governor’s spot. Of course, losing the Lt Governor is a big deal when the Senate is deadlocked.

      The RPV should have stuck with non-controversial Bill Bolling.

      1. well the perversity (is that a word?) of this is that the GOP, in general creamed the Dems in Va except for the POTUS and Senate because of the turnout vote.

        in most non-Presidential elections, for whatever reason, the turnout vote is lower and the GOP usually wins but even at the local rural level, people of ALL colors will urge their Richmond elected to NOT increase their gas taxes… and THAT’s what give ROVA the power in Richmond.

  6. I still think a un-appreciated approach has potential legs.

    Increase the tax but give it all to the localities in exchange for them taking on the 600 series roads and subdivisions.

    that gives them a lot of options and flexibility and lets the state take that money and put it on state roads of significance.

    you would make it in the form of an offer and allow counties who don’t want it to continue as before – with no guarantees of future money for their 6yr plans.

    The state must transition to a transportation business model like other states have. This is the transportation equivalent of moving from a defined benefit to a defined contribution scheme.

  7. Index the gas tax to inflation now.

    Funny thing about inflation. In some circles people say it doesn’t exist. They must be conservatives, who never buy anything. Or they might be liberals mesmerized by big government assistance.

    There is another circle that is invisible. Can you guess what it is?
    Your neighbors. The ones that bought their now underwater houses on interest only /adjustable rate mortgages. What do you think will happen after the politicians undercut these homeowners with increased taxes and interest rates?

    1. DJRippert Avatar


      Whether there is much inflation right now is an interesting question. Whether there has been inflation in road building materials and labor since 1986 is not really an interesting question. A dollar of today’s gas tax buys about half of what it bought when the tax was last raised (in cents per gallon) back in 1986.

      My neighbors would have more valuable property if Northern Virginia was not (fairly) perceived as one of the worst traffic disasters in the United States. Of course, that’s hard to accomplish when our state legislature decides that inflation doesn’t exist.

    2. the funny thing is that one penny on the gas tax generates 50 million dollars – statewide.

      think about this.

      one mile of 4 lane costs 20-50 million depending on right of way costs.

      down our way, it is costing 30 million dollars to add two miles of two lanes to four lanes.

      Indexing (which I support) will bring in chump change relatives to what we’re told the need is.

      Heck.. just one tunnel down Darrells way is a billion dollars, right?

      indexing needs to be done but it’s not going to be a cash cow at all.

      Personally what McDonnell is doing is pretty intriguing though troublesome.

      He is approving tolls roads with Va subsidies – de facto unfunded liabilities in the future which the GA will be forced to fund as transpo revenues fail to keep pass or even decrease – the bill from the private toll operators will be due and have to be paid.

      that’s one way to get more money, eh?

  8. Breckinridge Avatar

    I ain’t the ineffeblie, unaffble, whatever, stupid idiot you think I am. I see a few others who are skeptical about government tracking devices (assuming there are not six already) stuck onto their cars. You could also ask people to just report their mileage reading every renewal, as I think we used to do years ago. Then you get a bill based on that reading.

    What I like about the current set up is there is a sneaky, hidden tax on vehicle weight and inefficiency, and rewards for light vehicles and good mileage, baked into the standard fuel tax approach (and it needs to be a FUEL tax, with the right amounts determined for LNG, hydrogen, and even electricity if it is delivered at a roadside connection.) This hidden additional cost of driving a 6,000 pound road hog monster SUV with 12 mpg is one reason some people like the mileage tax idea. That you, Jim?

    1. No, that’s not me, Breckinridge. Although I did not say so in this particular post, I think the VMT tax should be adjusted by the weight of the vehicle to address the exact problem you just identified.

      As for your other point, it’s one thing to be paranoid if the government uses a GPS mechanism to track your mileage — you worry that government can track down your movements, including your visits to your mistress, the porn video store, Madonna concerts or whatever else you might find embarassing. But utilizing the devices used by the insurance companies is entirely different. They don’t track your movements. Any concern that they do is simple paranoia.

      1. DJRippert Avatar

        Bacon is right. First, the government uses cameras at red lights and to enforce speeding zones. Those cameras photograph you license plate and know where your car was when they take the picture. That already exists. EZPass knows which gantry on a toll road your cant passed every time you use that device. Police routinely use electronic devices in store parking lots to look at hundreds of license plates on parked cars to find stolen cars.

        Moreover, your cell phone communicates with cell towers whether you are using it or not.

        Yet, even that is not enough. Police also want cellular carriers to store 2 years worth of text messages so they can go have something to paw through in the future –

        You are already being tracked. The only question is what probable cause is necessary for government to access that data.

        Neither Progressive’s Snapshot nor State Farm’s In Drive systems record your location. Neither contains GPS technology. However, the In Drive system can be optionally configured to integrate with your GPS device if you have one in the care. State Farm offers this for safety, etc. It does not currently record the car’s location. However, it does not take a rocket scientist to imagine a day when you could get an even cheaper rate if your let State Farm (or anybody else) see how you were driving at the specific location where your car was being driven. 60 mph on the Beltway? OK. 60 mph on a side street? Not so OK.

        The only protection from a snooping government is laws that control the government’s access to data.

        Remember, red light and speeding cameras are already recording your location when you run a red light or speed. There is absolutely nothing that would stop those cameras from recording the license plates of cars that aren’t running a red light or speeding. In fact, the cordon parking system in London does just that.

        But don’t worry. Americans today are vigilant about the excesses of our government. Well, after watching Moonshining, Buckwild and Honey Boo Boo. Oh! We’re screwed.

      2. People understand that the govt is using technology to externally track them but they’re NEVER going to allow the govt to put a device inside their car to do it (even though they know their cell phones are that device – not all of them – yet).

        besides, in all likelihood, this would require Federal regulation and a national 50-state law anyhow and how likely is that with the Congress we have right now?

        and again, there is no way in heck that the Va GA will do this.

  9. there is another option:

    Your EZPass is uniquely ID’ed and CAN be tied to your VIN – which would identify it in terms of vehicle model and type but not directly as owner.

    If McDonalds can use EZ-pass to bill you for a burger what can’t Sheetz do the same thing and the govt levy a tax based on the EPA rating of your vehicle?

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