A Toyota Prius may save drivers serious cash when it comes to fill-ups at the gas station, but those same fuel-efficient cars are gutting state transportation budgets and leaving infrastructure and maintenance projects hanging in the balance.
Now several states, which heavily rely on gas taxes to fund transportation infrastructure projects, are looking for other ways to fund road repair projects, and it could mean the government is about to get a little nosier about your driving habits.
Some policymakers are toying around with the idea of taxing drivers based on the number of miles they travel as opposed to how much gas they use—a vehicle miles traveled or "VMT" tax. How the state will collect this information is still up in the air, with Oregon's Department of Transportation currently trying to come up with a solution.
"The public didn't particularly like that we used a GPS receiver to count miles," says Jim Whitty, manager of the Office of Innovative Partnerships and Alternative Funding at the Oregon Department of Transportation.
A new incarnation of the pilot program set to launch this fall eliminates any "government box" installed on vehicles, Whitty says. The program will instead rely on information culled from in-car navigation systems and other driver assistance systems, such as OnStar and SYNC. The state is also experimenting with some lower-tech options, such as allowing motorists to report data through their mobile phones or having drivers prepay for the miles they drive.
"The gas tax is dying a slow death with these highly fuel efficient vehicles coming into the marketplace that don't pay any gas tax or hardly any gas tax, [the flat gas tax] just will not survive," Whitty says. "That's being recognized by almost everybody."
According to the Institute on Taxation and Economic Policy, states have seen revenue from gas taxes plummet a combined $10 billion a year thanks to a combination of factors, including the increased fuel efficiency of today's vehicles.
But simply raising the gas tax isn't a sustainable long-term option, says Jaime Rall, who covers transportation infrastructure issues for the National Conference of State Legislatures.
"Our current reliance on the gas tax, because there are the alternative fuel vehicles, increasing fuel efficiency—long term, there are concerns about its sustainability," she says.
States' transportation infrastructure budgets have been hurting before the boom of fuel-efficient cars, so finding alternative revenue sources isn't so much a question of when but how. Everything from simply checking a vehicle's odometer to installing a transponder has been explored, each with their benefits and drawbacks.
Higher-tech methods have more flexibility in pricing, Rall says.
"A higher-tech [method] could have a transponder in your vehicle allowing for more flexible pricing on where you're driving and when you're driving," she says. "For example, you could be charged more for driving on a highway during rush hour, which could encourage people to use the system more efficiently."
The trade-off can be a driver's privacy. Unsurprisingly, most drivers favor lower tech options that don't give the government access to information about their whereabouts, Rall says.
In the meantime, Whitty and the Oregon Department of Transportation are gearing up to launch their second VMT tax pilot program this fall. The three-month trial includes participants in policymaking positions, "to show [them] the rudiments of a new system…so that they can experience it and success will be if they find that system is simple and easy to use," Whitty says. "That's what we're shooting for."
If all goes as planned, legislation to institute a VMT tax in Oregon could appear in 2013, but drivers shouldn't expect full adoption right away. Phasing the plan will take at least a couple of years, Whitty says.
Meg Handley is a business reporter for U.S. News & World Report. You can reach her at email@example.com and follow her on Twitter.