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Analysis & News on the Future of Public Finance

CSG: Looking at Mileage Taxes as a Campaign Issue

By CSG Partner, Joseph Krist

One of the biggest hurdles for proponents to overcome is individuals’ fears about being "under surveillance" through the technology used to track mileage. It is the kind of concern that calls for thoughtful assertive leadership in making the case to citizens that the future of road funding will decrease its dependence on declining fuel taxes and therefore will need another method of maintaining funding for surface transit purposes.

So it is highly disappointing to see the approach to mileage taxes being taken by Gov. Bruce Rauner in his effort to gain a second term. His opponent, Jay Pritzker has said that he wants to test a new vehicle mileage tax program. Motor fuel tax collections vary from year to year in Illinois but have overall stayed stagnant, when inflation is included, during the last 20 years. The state typically collects between $1.2 billion and $1.3 billion annually.

Now Rauner is running an ad which plays to fears about new ways of funding transportation. The ad portrays mileage taxes as a tax increase that may drive residents out of state. The ad says: “Worse yet he wants a car tax, which will also come along with a tracking device. How much is that going to cost us just to drive to a family member’s house?”

Pritzker has already addressed the concern about the plan being a tax increase — “I think it’s something we should look at, we have to be careful how it’s implemented and that’s why it should only be a test at this point.” He also did not go as far as to say he would make it state law. In addition, he would also allow for taxpayers to select the kind of device which would be required to calculate mileage.

Pritzker is basing his plan on the Oregon model that was implemented earlier this year. In Oregon, drivers must volunteer to be in the program, and so far roughly 1,200 have signed up. Drivers pay 1.7 cents for every mile they drive. The devices used in the Oregon experiment calculate both mileage and fuel use. Based on fuel use, those paying the mileage fee are reimbursed 34 cents a gallon — for paying the mileage tax. Volunteers can choose from GPS devices or devices without GPS that report the car’s odometer readings.

One of the hurdles to the achievement of good public policy is politics. The attempt to prey on  fears and mistrust in regard to mileage taxes is shortsighted. Declining fuel consumption is the wave of the future (no matter how much the Trump administration fights it) so some way must be found to replace fuel taxes as the primary source of road funding. Mileage-based taxes have the advantage of being essentially indifferent to developments in technology. Regardless of one's views on car ownership and technological change in the personal transportation space, the effort in Illinois to ignore the future is troubling. It will become more so as vehicle technology advances and electric vehicles become more mainstream.