Obama's National Mileage Tax Is a Bad Idea

The Obama Administration has recently floated the idea of a national mileage tax. The government would install electronic tracking equipment in vehicles to determine how many miles drivers traveled, and drivers would pay the tax electronically at gas stations.

The President proposes creating a Surface Transportation Revenue Alternatives Office costing $200 million through fiscal year 2017, to study how to best implement such a policy. The new office would examine four areas including “the capability of states to enforce payments, the reliability of technology, administrative costs, and ‘user acceptance.'”

I think a mileage tax is a non-starter for several reasons.

1. Mileage Taxes Are Regressive

Any mileage tax would harm lower-income people the most as transportation costs consume a far higher percentage of their income than wealthier consumers. One could argue that these taxes will likely replace current federal excise taxes on gasoline today, so the status quo would not likely change for these folks. However, I am skeptical that the federal government will ever phase out the gasoline tax, especially since it will naturally go away as people start replacing gasoline-powered vehicles with electric-powered alternatives. In fact, that is really what this mileage tax is really all about. The government sees this trend coming and is trying to get ahead of the problem before revenue from federal gasoline taxes start declining.

2. Mileage Taxes Will Likely Harm the Economy

The purpose of taxation is twofold: to raise revenue and to encourage/discourage citizen behavior. Unfortunately, in today’s day and age, there has been far too much emphasis on the former and not enough on the latter. Sadly, a mileage tax will actually encourage behavior that harms the economy because it will discourage people from driving. When people drive less, they will be less likely to attend a movie or drive to the mall for an afternoon of shopping. The bottom line is that a mileage tax will likely discourage economic activity because people will drive less and will have less discretionary income for consumption.

3. Administering a Mileage Tax Violates Privacy

A mileage tax will also likely require the installation of an electronic monitoring device in every car. Given the level of technological sophistication that currently exists today, the government will be able to track a citizen’s every move in a manner that far exceeds any of the previous administration’s “alleged” assaults on privacy.

4. Mileage Taxes Will Lead to Many More Taxes

Lastly, the installation of an electronic tracking device will be a veritable revenue bonanza for every state and local government. It will not be too long before every state and local government piggybacks on the federal government’s program and starts using the electronic device to paper Americans with every manner of revenue enhancement.

Are you driving 1 mile over the speed limit? Yes?

Bam! Instant ticket.

Did you slow down to fewer than 0.1 miles per hour at that stop sign? No?

Bam! Instant ticket.

Did you travel to the city between the hours of 6 and 10 a.m.? Yes?

Bam! Congestion charge.

As they say, the road to perdition is paved with good intentions…


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