Dutch cabinet approves mileage tax

The Dutch cabinet has approved a plan for a GPS-based driving tax, to be set at an average of $0.07 per mile in 2012, rising over time. Motorists will be charged more for driving on heavily congested roads or at peak times. The proposal still requires parliamentary approval.

When I’ve written about mileage taxes in the past, I’ve been reliably informed that such schemes unfairly punish the virtuous drivers who own hybrids and other somewhat-less-polluting vehicles. But under the Dutch plan, gas guzzlers will pay a heavier tax. Also, the plan is expected to address several problems that all cars contribute to, regardless of fuel efficiency:

* Traffic fatalities are expected to drop by 7%
* Total traffic will drop by 15%
* Rush-hour traffic will drop by 50%
* Infrastructure costs should drop proportionately (Netherlands has some of the most heavily used roads in Europe)

It’s also been explained to me that such schemes are an intolerable burden on the poor. But the Dutch system is revenue neutral, entirely offset by the reduction of other transportation taxes. The elimination of a vehicle purchase tax will lower car prices by 25%. Road taxes totaling $900 per year for a mid-sized vehicle will also be eliminated. Public transport will be exempt from the mileage tax, and of course public transport — used disproportionately by the poor — will become more pleasant and more valuable when congestion is reduced. The plan’s authors expect that 60% of drivers will pay less under the new tax system than under the old. (Some complain that people who need to drive a lot for business will be unfairly punished by the new tax, although this criticism seems to me rest on a peculiar definition of the word “unfair.”)

Many tell me that a gasoline tax is a far simpler means of achieving the same ends. Of course, a gas tax doesn’t include congestion pricing. And as an increasing proportion of cars achieve very high gas mileage or replace gas tanks with batteries, gasoline taxes become a weaker lever over driver behavior. But fair enough: driving taxes will be harder to collect than gas taxes. The Dutch plan requires that the overhead of tax collection remain a small percentage of total revenue from the driving tax. It will be interesting to see whether this goal is met.

Finally, I’m warned that GPS-based systems that track drivers are a sign of incipient fascism. Privacy concerns are, of course, perfectly legitimate and appropriate, and the Dutch plan includes legal and technical protections to guard against abuse of the system. These protections may assuage you; they may not. Personally, I’m not sure why mileage taxes represent a bright line that we can’t cross, when we’ve already crossed several other such bright lines with our computer, phone, and financial networks, and I think that in general we really have no choice but to rely on legal and technical protections. But I grant that the issues involved are real.

Prediction: the Dutch system will work fine. Several other countries in Europe will adopt it in the middle of the decade. One or several U.S. states will then follow suit, perhaps prompted by the ongoing transportation funding crisis. In a decade or so, this sort of system will be widespread.

Related 1: an ever-shrinking proportion of U.S. roads are funded by user fees.

Related 2: U.S. Transportation Secretary Ray LaHood recently broached the idea of pegging the federal gasoline tax to inflation. The gas tax has remained static since 1993. Transportation infrastructure costs have risen at twice the pace of inflation. LaHood’s suggestion will be ignored. **Update**: the Dept. of Transportation wrote in to let me know the original story was misreported. LaHood simply said that an indexed gas tax is “something I believe Congress will debate,” rather than an option he explicitly endorses. The fact that the DOT is patrolling the blogosphere to tamp this story down says a lot about the political radioactivity of the gas tax.

Related 3: PG&E expects that it will be providing electricity for between 219,000 and 845,000 electric cars and plug-in hybrids by 2020. A rolling EV gathers no gas tax.

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  1. lee - December 2, 2009

    Just what we need another tax.When there is nothing left to tax what will they do.It is time for a tax payer revolt at the next election cycle !! lee f……

  2. richard schumacher - December 2, 2009

    Maybe we need a non-comprehension tax… lee f, note that with the mileage tax comes elimination of the new-car purchase tax and the annual road tax for modest cars.

  3. Ed Heath - December 2, 2009

    I am not sure that the statement “public transport

  4. Adam Stein - December 2, 2009

    Ed — I was perhaps a bit cryptic with this comment. What I mean is that one of the main determinants of the pleasantness of public transportation is the speed of travel. Among the reasons that most bus systems suck so bad is that they’re horrifically slow. If rush hour traffic really drops by 50%, buses will move much more quickly, and will in that sense be more pleasant to use. I believe this has in fact been the result in London, so it’s not entirely theoretical.

  5. michael - December 2, 2009

    I’ll take a cynical stance…we’ll be taxed more and very little if anything will change. But then, we can stay in Pakistan for a wee bit longer…
    My basic problem is so many repsonse mechanisms have been – must be – correlated if this is to work. But humans are funny folks…unpredictable some will say.
    On the other hand…
    I drive 60,000 miles a year and every car I own is basically dead after 4 years. I have pleaded with my employer to work from home 2-3 days a week…11 years later nothing. And I can perform my job efficiently from home. If I pay the tax there is no hardship for my employer…if he pays I may well be working from home 2-3 days a week. I will be a much happier human! and the money he saves from reduced fuel costs will more than offset the tax…this could be a winner.

  6. Emerson Schwartzkopf - December 2, 2009

    While a user-based charge is better than blanket fees, the Dutch proposal does seem to lean heavily on those using their vehicle for business. Not everything can be done by email and Webcam, particularly in sales.
    The problem I see here is right at the start, with a GPS-based fee. Yes, computers and networks are wonderful, but I don’t think I can keep a straight face if someone tells me that tracking the 24/7 movement of millions of vehicles is going to cost less and not require any more labor or effort than collecting fuel, purchase and registration taxes. And, I’m not very keen on governments (or anyone, really) being able to track where I’m going with a vehicle. Unless I’m in the act of abetting a felony, I see this as a very large divot in my privacy.

  7. Richard Gilbert - December 2, 2009

    [And…deleted. Leaving the same comment multiple times on this and other blogs is spam. Also, your idea is not so good.]

  8. CJ - December 2, 2009

    Well, there’s already a mileage tax in the US — it’s the gasoline tax. You pay it for every mile you drive (as measured by the amount of gasoline you burn). Lower-average-mileage vehicles pay more because they use more gasoline. It doesn’t require technology or massive bureaucracy, and it doesn’t cause privacy concerns.
    And no, there are no gas taxes on EVs. There are a host of other taxes, including sales taxes, renewable portfolio standard fees and costs, and other assessments against electricity providers that show up in your bill.
    I never agree that if we just had a whole bunch more money available, then we’d make mass transit better. I think the level of commitment would remain about the same — if it were REALLY a priority, it would show up in our current constraints. You can change your priorities without changing your budget. But that’s not going to happen because we rely on a federal system to fund transportation, and the power dynamic doesn’t favor the places that have been most efficient with their transportation systems. So more money will not support a change in the dynamic.
    I always have a problem with taxes that are imposed in hopes of creating paradise — it’s just not an honest way of approaching a policy. Find the problem and figure out a way to fix it — sometimes a tax IS the answer. But on their own, taxes don’t solve problems.

  9. Terry - December 2, 2009

    Ed Heath seems to question the idea that public transport can be made more pleasant. In Holland it does not take luck, but rather serious commitment. For those unaware, public transport in Holland is absolutely NOTHING like public transit in America. The Dutch trains are incredibly fast, inexpensive, convenient, clean and you can set your watch to their arrivals and departures. Here in the U.S., we could learn a great deal about public transit from the Dutch.

  10. Garrett - December 3, 2009

    I would be all for this plan- IF I lived in the Netherlands. They have a great public tranportation system and compact, well planned cities with bike use encouraged (at least I know Amsterdam does). And evidently they already have a lot of vehicle taxes available that they can reduce to attempt to make this plan revenue-neutral.
    However, given that the longest distance you can drive in the Netherlands is about 240 miles (distance between cities at the extreme east and west) and it has about the same land area as Maryland, odds are if I lived there I wouldn’t need to drive far. And would probably take a train if I had to (because they already have a great system).
    I can see certain small states implementing this- but do this on a nation-wide basis in the U.S. would be ridiculous. The U.S. as a whole lacks what makes this system viable for the Netherlands (a good train system, small distances, and a large tax base on vehicles to reduce).
    The only thing that separates this from a plain mileage tax (based on odometer readings when you renew your car’s registration for example) is the congestion pricing. To me, hooking up every car with GPS, a reporting system, country- or state-wide surveillance and tracking system, the computing and database power to charge for all those variables, and the legal team required to ensure privacy is way too complex for the sole purpose of implementing congestion pricing.