There is a better way to fund our road system
By Herbert Rothschild
When we choose, we’d usually do better to think in terms of “wise” or “unwise” than “right” or “wrong.” That’s because most choices entail costs as well as benefits, and we choose wisely when both have been weighed. This is especially true of public policy choices.
The federal government and most state governments at present are having difficulty funding their transportation programs. That’s because funding has been closely tied to the fuel taxes they levy, and revenues from fuel taxes aren’t keeping up with expenses.
In 2023, American drove over 3 trillion miles, more than any previous year. Yet, in inflation-adjusted dollars, highway revenues per vehicle mile were 47% what they were in 1977. One reason is that at the federal level and in most states, the fuel tax isn’t indexed for inflation.
The other reason for the drop in revenue from vehicle miles traveled is that vehicles have become more fuel efficient. The average MPG for passenger cars has increased more than 75% since 1977, and the number of electric vehicles on the road is increasing. Both these developments were either mandated or encouraged by public policies.
The federal Highway Trust Fund gets most of its dedicated revenue (just over 80%) from the gas tax and the rest from taxes on sales on trucks and tractors of more than 33,000 pounds gross vehicle weight and of tires, and on heavy truck road use fees. Congress hasn’t raised the gas tax since 1993, when it was set at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel. In 2024, the trust fund ran a deficit of $13.5 billion, and the Congressional Budget Office has projected that it will accumulate a $280 billion deficit by 2034.
Oregon’s gas tax isn’t indexed for inflation either, but our Legislature has been raising it. The “Keep Oregon Moving” bill of 2017 mandated a 10-cents-per-gallon increase over six years, reaching 40 cents last year. HB 2025, the comprehensive transportation bill in the session just ended, would have raised the gas tax 10 cents per gallon in 2026 and another five cents in 2028. When its progress stalled near the end of the session, a stopgap measure to raise the gas tax three cents and title and registration fees by $21 and $91, respectively, was quickly drafted. However, it also failed to command the supermajority (60%) that tax bills require for passage.
Gov. Tina Kotek consequently ordered layoffs for nearly 500 Oregon Department of Transportation workers, effective July 31, with a second round likely by early 2026. Further, almost 450 vacant positions were eliminated. Kotek may call the Legislature back into session to try to pass a bill, but her party can’t afford to lose even one vote in either chamber, because all the Republicans are likely to stand firm against any increase in the gas tax.
What lawmakers should do, if they find themselves stymied, is to abandon the gas tax completely. It is no longer an adequate proxy for vehicle miles traveled (VMT). The gas tax should be replaced by a mandatory VMT tax on all vehicles. Sometimes referred to as a road use fee, the VMT tax is assessed on each mile driven on public roads within the taxing jurisdiction.
This alternative approach to requiring drivers to bear the expense for the public utilities — roads and bridges — they are using is not a new one. Indeed, Oregon has gone farther down this road than the federal government, which has no VMT tax on passenger vehicles, and any other state. Four states have opt-in programs for passenger vehicles, and five states tax heavy commercial vehicles per mile. Oregon is the only state that does both. Sixteen more have launched pilot programs to explore how best to implement a VMT tax.
No state, however, has made mandatory its VMT tax on passenger vehicles. Hawaii will levy its tax on all EVs in 2028 and on all passenger vehicles in 2033. Had HB 2025 passed, EV drivers in Oregon would have had to pay a road use fee or a flat $340 annual fee. Currently, though, Oregon relies on a reduction on DMV fees to induce people to enroll voluntarily in its OReGO program and pay two cents per mile driven in Oregon, from which the taxes they pay on any fuel purchased for the participating vehicle are deducted.
I didn’t know Oregon had such a program until I began research for this column. I ran across a mention of a pilot program Oregon had started in 2007, but I didn’t discover OReGO until Pam Marsh, our unfailingly helpful state representative, pointed me to it. I’m not sure whether or how ODOT makes its availability known to the public. It wasn’t mentioned to me when I renewed my car registration out on Biddle Road or when I got my REAL ID-compliant driver’s license at the Medford DVM office.
To understand how Oregon’s voluntary VMT tax program works, visit the OReGO website. Its FAQ section explains, among other matters, what kinds of vehicles currently qualify for the program, how the mileage of an enrolled vehicle is tracked and reported, and how the deductible gas taxes paid by drivers of gas or hybrid vehicles are figured. On the site there is a calculator to compare what you now pay in estimated monthly fuel taxes to what you would pay if enrolled in OReGO. And you can enroll then and there.
It’s true that people should be encouraged to buy vehicles that contribute as little as possible to global warming, but if financial incentives beyond their savings on fuel are needed, they can be offered at point of sale. Funding the building and maintenance of the transportation infrastructure is a separate matter. It should be borne equitably by all those who use it.
Herbert Rothschild’s columns appear Fridays. Opinions expressed in them represent the author’s views. Email Rothschild at [email protected].
