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Bridge Michigan
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Gretchen Whitmer won’t boost gas taxes. But maybe a mileage tax for roads?

someone charging electric vehicle
Electric vehicle sales have increased dramatically in Michigan, but they still compose less than 1 percent of all cars on the road. (Shutterstock)
  • Gov. Gretchen Whitmer still wants to ‘fix the damn roads’ and is looking for alternative funding sources beyond the gas tax
  • As more electric cars hit the roads, some states are moving toward ‘road use taxes,’ which charge based on miles driven
  • Many states are also exploring alternatives but privacy concerns are among the many barriers 

LANSING — Michigan Gov. Gretchen Whitmer wants to re-imagine infrastructure funding and is exploring the possibility of a mileage-based tax system as she continues her quest to “fix the damn roads.”

As she prepares to start a second term in January, Whitmer told Bridge Michigan she will not pursue another fuel tax increase like her failed 2019 plan that would have raised the state's tax by 45 cents a gallon from 27.2 cents.

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Instead, the Lansing Democrat plans to kick-start a discussion about how Michigan funds roads amid the continued shift toward electric, hybrid and more fuel-efficient vehicles.

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“It’s going to be important that we convene a group of stakeholders and make sure that it’s bipartisan, that we come up with a solution that recognizes the historic transition that's happening in the auto industry,” Whitmer told Bridge Michigan. 

“Traditional ways of funding our infrastructure don't make sense because of that transition.”

No state has figured out a perfect solution, Whitmer said. But she pointed to Oregon, which in 2015 became the first in the country to launch a voluntary “road usage charge” program that reimburses motorists for any fuel taxes they pay and asks them to instead pay a tax based on how many miles they drive. 

While the program has sparked privacy concerns, it’s a concept that is catching on as policymakers develop data protection laws and give drivers more choices in how to participate. 

Utah and Virginia now also have voluntary mileage-based tax programs. Eleven other states have launched smaller pilot or demonstration programs, and five are conducting feasibility research, according to Jim Whitty, who helped create Oregon’s program and now works as a national consultant for CDM Smith, a Boston-based engineering firm.

The goal of those state-level programs, at least early on, is not to raise new revenue for road repairs, but to instead create a system that can maintain current revenues as more electric vehicles hit the road. 

“Michigan need not feel like they're on their own,” Whitty said. “They can do their own innovations, but they’ve got a lot to build on. So it really is a great time to start. It's not too late."

In Michigan, local government and road construction groups d hope to begin the debate early next year. 

The County Roads Association of Michigan is preparing to release a study on the impact of electric vehicles in January. The Michigan Infrastructure & Transportation Association is working on a larger study of road funding alternatives that could be released in February or March. 

"We do believe that vehicle miles traveled is the fairest and the most equitable way to charge individual users," said Lance Binoniemi, vice president of government affairs for MITA. 

"And so we will be pursuing at least some sort of pilot study or something by the state to get us in the right direction,” he said. “We're a little behind the eight ball."

Early adopters

While the details vary, voluntary road usage charge programs in Oregon, Utah and Virginia are built around a belief that fuel taxes won’t provide a long-term funding solution for roads given alternative and increasingly fuel-efficient vehicles. 

Drivers typically plug devices into their cars to log and transmit mileage, an add-on that may become obsolete if automakers build the technology into new cars. Each state also provides non-GPS options, including odometer image capture systems in Oregon and Utah that allow users to upload cellphone pictures in a manner akin to a mobile check deposit. 

Americans currently consume more than 120 billion gallons of gasoline each year, but that could drop to 40 billion gallons by 2050, according to Whitty’s projections. State and federal fuel tax collections could drop by $67 billion over that span. 

Michigan and 30 others states have so far responded by imposing new fees on electric or hybrid vehicles. 

For 2022, EV owners in Michigan are required to pay an extra $140 fee atop of their normal vehicle registration fees. Plug-in hybrid owners pay an extra $50. Those fees are expected to generate about $4 million this year. 

The state generated $1.1 billion in gas taxes in 2021, a level that remained flat since 2017 but declined temporarily in 2020 as motorists drove less early in the COVID-19 pandemic. Revenues have not kept up with inflation, and the state’s nonpartisan Senate Fiscal Agency predicts "substantial declines" in coming decades as more EVs hit the road.

As of 2021, only 0.2 percent of all registered vehicles in Michigan were electric, but they increased ten-fold to 17,500 that year from 1,600 in 2016, according to federal data

Critics contend EV and plug-in hybrid fees the state first implemented in 2017 are unreasonably high for owners who pay higher registration fees because their cars cost more.

The EV fees have “unfortunately been shown to result in annual road maintenance contributions that are, on average, significantly higher than those for conventional gasoline vehicles,” according to a 2021 report by the Michigan Council on Future Mobility and Electrification. 

The council, created by Whitmer, recommended the state develop a pilot program for a vehicle miles traveled tax that would "more accurately reflect road usage and the gas taxes that owners of gasoline vehicles pay today." 

A mileage tax could be more fair for EV owners, but it should be calibrated to ensure it does not benefit people with gas guzzlers, which has been a problematic flaw of the Oregon program, said Charles Griffith, a clean energy expert with the Ann Arbor-based Ecology Center.

Simply replacing fuel taxes with a miles driven tax won’t solve the political debate over road funding, he said. 

“Every time you're going to raise your VMT (vehicle miles traveled) fees, you could still have outrage and opposition to anything that's going to increase your cost of driving.”

Oregon waives EV fees for drivers who pay the optional mileage charge and has begun excluding any vehicles rated 20 mpg or less, a recent change to avoid refunds the state had been paying out to motorists with inefficient vehicles that were actually making money through fuel tax reimbursements.

Utah is limiting its program to only EV or alternative vehicles in 2023. Virginia waives a highway fee otherwise charged to any vehicle rated 25 mpg or greater. 

Voluntary participation in the programs has been minimal. In Oregon, less than 1,000 drivers currently participate, but experts say that has allowed the state to prepare for the next big policy debate: When to make it mandatory.

“The next frontier is states requiring this for certain vehicles in a certain year,” said Douglas Shinkle, transportation program director for the National Conference of State Legislatures. “My prediction has been that in a state or two, we're going to take that leap in the next two to three years.”

Oregon charges participants 1.9 cents per mile, which is equivalent to the state’s 38-cents per-gallon gas tax for a 20 mpg vehicle. Managing the program has been more expensive than simply collecting a fuel tax, however, and a state task force has said Oregon must find ways to reduce administrative costs before making it mandatory. 

Under one Oregon proposal, not yet adopted, the state would require all vehicles rated at 30 mpg or higher to enroll in the road usage charge program by the summer of 2028. 

Ultimately, a national program may be the most effective way to track driver miles across state lines, Shinkle said. “But the way it's going to operate in the short to mid-term is that it's probably going to pop out a few states at a time.”

Experts say fuel taxes aren't going anywhere and will remain a primary user fee for motorists with internal combustion vehicles. But they expect more and more EVs on the road, especially with California recently deciding to ban the sale of carbon-emitting vehicles by 2035. 

Big Brother

One possible barrier is privacy concerns, as fears over mileage data collection may have limited participation in voluntary programs.

“A lot of people see this as somehow Big Brother in their car,” said Bob Poole of the Reason Foundation, a national libertarian think tank that supports the road user charge concept as a direct user fee that would fund road repairs by taxing drivers that use them. 

Oregon has attempted to mitigate concerns by essentially creating a "bill of rights" in state law, Poole said. 

Under Oregon law, any personally identifiable information that is collected from motorists who participate in the OreGo program must be destroyed within 30 days, and police need to obtain a warrant before accessing any of the data. 

Oregon has also given drivers several choices for how to log miles. The downside for drivers who decline to install a GPS device is they are more likely to end up paying a state tax for driving on roads the state does not maintain.

“The real tension is accuracy versus privacy,” Shinkle said, noting GPS can differentiate between roads.  "If you want perhaps more privacy, a non GPS option, well if you drive out of state or if you drive on private roads — say you live on a big ranch or whatever — you're going to sacrifice accuracy for privacy." 

Oregon also lets drivers decide who to share their mileage data with: The government, or two private vendors that contract with the state to administer the RUC program and tax payments.

That can alleviate privacy concerns — “one driver may not want to share their information with the government, but another driver may not want to share their data with a private entity” — but increases administrative costs, Shinkle said.

The Reason Foundation and Mackinac Center for Public Policy, both of which have significant sway with conservative lawmakers, are recommending that Michigan begin the transition towards a mileage-based tax system by imposing a road usage fee on interstates and freeways only

Doing so would allow the state to overcome privacy concerns by using  in-car transponders like the EZ Pass toll system already used in other states and “proven as acceptable to millions and millions of people,” Poole said.

Under the Reason Foundation model, Michigan would provide drivers with a rebate for fuel taxes they already paid to cover those highway miles. The state would need to figure out a different technology to expand the program beyond highways, because it’s not feasible to have EZ Pass transponders on every roadway across the state, Poole acknowledged. 

Federal funding

As of last summer, 14 states and regional networks had received federal grants to explore road usage charges and other alternative road funding mechanisms under a program that covered up to 50 percent of their costs, according to the National Conference of State Legislatures. 

Texas got $5 million to develop a demonstration program that would use existing cell phone technology to assess travel patterns and develop a gas-tax alternative. Minnesota and Kansas got a combined $3.25 million to study a potential regional road usage program for the Midwest. 

There's now even more federal funding opportunities for states like Michigan under the massive federal infrastructure law signed earlier this year by President Joe Biden, which will fund a national road usage charge pilot program but also boost state support by covering up to 80 percent of local costs.

The federal grant program “favors new entrants,” said Whitty, the Oregon program architect. “A state with the stature and imagination of Michigan could jump right to the front of the line,” he predicted. 

Whitmer would be smart to convene a task force or advisory committee to explore future road funding options, weighing the pros and cons of each and then recommending one in a public fashion, Whitty said.  

That's what Oregon did more than two decades ago when the state Legislature created a Road User Fee Task force in 2001, a time when widespread electric vehicle adoption seemed like far less of a certainty.

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"That's always a good thing to do to build public support for whatever choice is made, because you can explain why," Whitty said.

Whitmer has not yet announced a task force but hinted at that possibility when she told Bridge she wants to “pull stakeholders in” to develop “bipartisan” solutions for the future road funding in Michigan. 

“I think we've got an opportunity in front of us, but it's not going to come from one person or one perspective,” Whitmer continued. 

“It's got to be something that we work on together so that we can get it passed, and I'll ultimately continue to build out infrastructure in the state.”

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