The transportation revenue conundrum

Yesterday’s action by a legislative study commission to give a tentative endorsement to a menu of possible new revenue options for the state transportation system has given rise to a fair amount of discussion – particularly around the issue of a “Vehicle Miles Traveled” tax (or VMT). Some people are understandably concerned about the Big Brotherish aspects of having government read and keep track of your odometer every year – though since its agents already probe and prod your car once every 12 months anyway, I’m not so sure what the real fear is.

As I noted in a comment over on Blue NC earlier today, however, the VMT tax is really just a part of a broader (and unavoidable) discussion about how we pay for transportation in a rapidly changing, more fuel efficient world. As I said there:

“The reason that the VMT tax is getting serious consideration is a simple matter of economics. Right now, gas tax revenues are in the toilet. In many ways, this is good. We want to encourage fuel efficiency, etc…. The problem is that, over time, the state will simply not have enough money to keep up the roads we have — much less upgrade and modernize the system. And there is clearly a need for more transportation money in a fast-growing state — both for highways and mass transit.

Now add to this mix the fact that various tax options can be incredibly regressive and unfair to folks of lower and moderate income and you can see what a jigsaw puzzle the whole thing is.

All of which is good reason to be on the lookout for a soon-to-be-released report from Dr. Steve Jackson at our sibling organization, the N.C. Budget and Tax Center. Steve’s report will examine the whole transportation finance picture and present a menu of progressive (or, at least, less regressive) revenue options for the state to consider as it goes forward.”




  1. Rob Schofield

    November 20, 2008 at 2:12 pm

    Well, there must be something wrong with VMT. Click here to read a Pope-Civitas endorsement.

  2. Kimberly

    November 21, 2008 at 7:30 am

    As a small service business owner, I do not support the proposed VMT. We have a great many contractors, service businesses, home health care businesses, etc., that have to drive to a customers home to conduct their business. We drive thousands of miles per year in the service industry. If we had to pay additional fees for mileage then we would have to pass that cost on to consumers which will have a negative impact on the service industry. Add this proposal to the proposed taxation of service labor and you might as well shut the doors on hundreds of businesses because we will not be able to pass along the total costs to consumers and stay in business. Considering the service industry accounts for a large majority of small businesses and we get very little assistance from any programs that help businesses, we need to be finding ways to assist the service industry instead of adding more financial hardship.

  3. Kimberly

    November 21, 2008 at 7:39 am

    The proposed VMT will have a strong negative impact on the poor, working poor, and struggling middle class. While I understand that the state needs to “find money” due to the growing deficit, we need to focus on building jobs and growing the state economy. Additional taxation is not the answer to our state debt. We can increase revenue by increasing jobs, home ownership, all of the things that help the citizens of the state. I’m not talking about giving money to huge corporations with the hope that they will stay in NC or move to NC, that hasn’t worked out to well and with the national economy falling then I would be worried about any company with a stock portfolio. I am talking about incentives to individuals to start or expand a small business and hire employees. Every large business starts out as an idea that someone has and grows from there. That would help the people of the state and provide additional revenue.

  4. Mike

    November 22, 2008 at 5:54 pm

    In this post Rob states “Right now, gas tax revenues are in the toilet. In many ways, this is good. We want to encourage fuel efficiency, etc…. ”

    My understanding of the VMT is that it has been proposed as a replacement of the existing gas tax. Replacing the gas tax with a mileage tax does not promote fuel efficiency. If you have a car that gets 40 MPG right now you pay half as much tax as some one how drives the same miles as you. If you have that same car and they tax by the mile you will pay twice as much tax per gallon of gasoline as someone driving a 20 mpg car.

    The VMT may encourage you to drive fewer miles but if anything it provides a disincentive to drive a fuel efficient car. To me this is just another attempt to provide a subsidy to people who drive large SUV’s or other vehicles with large motors. This is precisely the opposite of what we should be doing with our tax policy.

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