Taxed on the miles you drive?

Yahoo news today is reporting that the Federal Highway Trust Fund that pays for highway construction and maintenance is in danger of going broke. Since Americans started really driving less in 2007, gasoline tax revenues (which are the primary source of funding for the Trust Fund) have been down. Even Republican George Voinovich is on the record as stating that the gasoline tax needs to be increased. But a "panel of experts" has suggested that the best way to raise revenue is to charge people by the mile. Every car would be equipped with a GPS tracking device, and it would not only calculate how many miles you drove, but whether you drove on an interstate, highway, rural road, etc.

On the surface, this sounds rational. The more miles you drive, obviously the more impact you have on the road conditions. Unfortunately, there is a major flaw with this argument. By taking away the gasoline tax and replacing it with a mileage tax, you disincentivize the purchase of fuel-efficient cars. When gas prices go higher, either due to market forces or additional taxes, people tend to drive less and buy more fuel efficient cars. Hell, I did just that last summer, buying a salvage title 1997 BMW 328i to do long distance commuting in, instead of my 14 mpg Jeep Grand Cherokee. In Europe, gasoline taxes are very high, resulting in costs for unleaded gasoline in the $7/gallon equivalent range. Which explains why both small cars are very popular in Europe, even as luxury cars (see the BMW 1-series and Audi A3 as examples), and why you can buy just about any car in Europe and get an optional diesel engine. Diesel fuel costs are roughly half of what gasoline costs are in Europe, due mainly to the tax breaks offered for the greater fuel-efficiency of diesel. Removing this incentive tool here would simply convince people that it won't make much of a difference whether they buy the V6 versus the 4cyl engine, or whether they get a 7 passenger Chevy Tahoe truck-based SUV that gets 15 mpg combined versus a Chevy Avalanche 7 passenger crossover SUV that gets a combined 19 mpg.

I'm not in favor of taxes in general. Personally, I think a flat income tax of 15% with very few loopholes would probably do a better job of generating revenue than the current system, and it could possibly allow for the elimination of some current taxes. But however it shakes out, a per gallon tax on gasoline is the best compromise for raising Highway funds, while still encouraging increased fuel-efficiency, which itself leads to less dependence on foreign oil and fewer greenhouse gas emissions. That's what I have to say.