Mileage-based road tax ideas could stall out over privacy concerns

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Capital News Service

LANSING – Proposals to give Michigan’s road funding methods a tune-up could face a speed bump from privacy advocates.

One proposal: The Mackinac Center for Public Policy, a free-market think tank, advocates a mileage-based user fee rather than relying on the current per-gallon fuel taxes to fund roadway projects and maintenance.

“We would have a more efficient and more effective system if we better tied road funding to road usage,” said James Hohman, the director of fiscal policy for the Midland-based Mackinac Center. “It would ensure that the people who were responsible for using the roads are the people who pay for them and that it falls in proportion to usage.”

Motorists currently pay 28.6 cents per gallon at the pump in Michigan, in addition to a 18.4 cent federal tax, a 6% sales tax and a 1% environmental tax.

Other proposals that the state Department of Transportation and legislators are looking into include converting some highways into toll roads. 

Brad Wieferich, the acting director of MDOT, said mileage-based user fees would be a good replacement for the gas tax since they are similar in concept.

“The theory is you drive more, you pay more, you drive less, you pay less – very similar to what we have with the fuel tax,” Wieferich said.

However, Hohman said distrust in government poses a challenge to serious legislative consideration of the proposal.

“People don’t trust the state government to track them and to charge them for the road usage,” Hohman said.

“There is some technology that can keep this information private, and we can put in huge debilitating penalties upon any government, contractor, hacker or otherwise, who breaches those privacy concerns,” Hohman added.

“But we’re never going to get to that system until people trust that this is something that our government can adequately, feasibly and equitably administer,” he said.

Wieferich also expressed concerns over how the data would be collected.

“Are people going to have to report their odometer mileage every month or every year? Are we going to put a transponder in people’s cars that we’re going to track” how far they go? he said.

“We’re likely not going to do that, even though everybody’s tracking you right now, every step that you move, with your phone,” he said.

Rep. Pat Outman, the top Republican on the House Transportation Committee, said the proposal is the main one that stands out as the committee considers ways to increase funding. 

“I don’t really know of a good alternative, other than having some sort of patchwork of various road funding taxes,” said Outman.

Outman, R-Six Lakes, said he hopes to learn from other states that have mileage-based user fees in place. 

Six states currently have pilot programs, according to the Bipartisan Policy Center, a think tank based in Washington, D.C.

Oregon and Utah have the most advanced of the pilot programs, the center said, allowing drivers to avoid paying registration fees if they opt instead to be assessed the mileage-based fees. 

Outman said one thing he would need to see addressed before Michigan moved to such a system is how out-of-state drivers would be charged.

“Right now, we capture a lot of those dollars when they fill up at the pump,” Outman said. “Short of some interstate compact with a bunch of other states, I’m not sure how we can address that.”

Hohman pointed out that truck traffic already uses interstate agreements to allocate taxes across jurisdictions.

But Hohman said states would first have to “demonstrate that governments do not use this for tracking and social control and show that they can be trusted to implement a fairer and better system for road finance.”

While some advocates point to mileage-based fees as a potential solution for decreasing gas tax revenue as electric vehicles become more widely adopted, Hohman said projections of the decline of that revenue source are overstated.

“Michigan’s system is remarkably robust,” Hohman said.

“Michigan is protected from the transition to electric vehicles more than most places. This catastrophe that people are predicting from this gradual transition to electric vehicles is not going to affect Michigan that much,” he said.

That’s because the fuel tax adjusts for inflation annually, and only about half of the state’s road funds come from the tax, Hohman said. 

The rest comes from vehicle registration fees, with electric vehicles charged an additional fee to offset their lack of gas tax payments.

Still, Wieferich said, additional funding is needed to turn the state’s roads around.

“I used to have an old boss that used to tell people to go out and look at the roads and realize that without additional funding, not just (issuing bonds), that’s as good as they’re going to get,” Wieferich said.

Hohman said that moving to a mileage-based model could allow the state to share funds among state, county and local roads more equitably than the current formula which local governments have long complained about.

“Once you start assessing fees based on usage, you can start redistributing fees based on usage as well,” Hohman said.

Wieferich said the most pressing need is more overall funding.

“If we’re just talking about carving up the pie differently, you’re still going to have the same result on the system,” Wieferich said. “What I’ve advocated for is growing the pie. How do we make a bigger pie so that everybody gets what they need?”

Gov. Gretchen Whitmer has made road funding a high-priority campaign issue.

Outman said both parties recognize the need to create additional sources of revenue for roadways before their condition falls into a pothole so deep it becomes extremely costly to address.

“Everybody agrees that if we don’t do something, our roads are going to deteriorate incredibly quickly and Michigan will really be in a pickle,” Outman said. 

Ultimately, Hohman predicted a long road ahead for the mileage proposal.

“Distrust about going in this direction has been sufficient to avoid strong legislative interest in exploring this as a model,” Hohman said. “Our politicians are going to be some of the last people to recognize this, regardless of the partisan makeup” of the Legislature.

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