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Cato Versus Cato: VMT Tax Yes; VMT Tax No

traffic jam in rear view mirror

I had the (dubious) pleasure to be on Larry Kudlow’s show last night on CNBC, debating the Cato Institute’s Daniel Mitchell (as well as it turned out, Kudlow) on whether government should institute a vehicle miles traveled (VMT) tax system to replace the gas tax. First some background: A VMT system is increasingly the policy recommendation favored by most transportation policy experts and transportation organizations. One such organization is the National Surface Transportation Infrastructure Financing Commission, a body created by Congress to “assess future federal highway and transit investment needs, evaluate the future of the federal Highway Trust Fund, and explore alternative funding and financing mechanisms for surface transportation.”

I had the pleasure to be appointed to the Commission by the Bush Administration (and then to be elected Chair by the Commission members).  The Commission wrote:

“The Commission cast a wide net, reviewed many funding alternatives, and concluded that indeed the most viable approach to efficiently fund federal investment in surface transportation in the medium to long run will be a user charge system based more directly on miles driven (and potentially on factors such as time of day, type of road, and vehicle weight and fuel economy) rather than indirectly on fuel consumed. At the same time, this choice for the federal system provides a foundation for state and local governments that choose to use it to develop their own mileage-based systems that piggyback on the federal system in order to raise their share of needed revenues in ways that spur more efficient use of the system. The Commission believes that such a system can and should be designed in ways that protect users’ privacy and civil liberties, that incorporate any necessary cross-subsidies (for instance, to benefit the national network or to meet social equity objectives), that do not interfere with interstate commerce, and that support goals for carbon reduction. Moreover, greater use of pricing mechanisms, including both targeted tolling and broad-based VMT pricing systems, may spur more efficient use of our highway network and, by shifting demand to less congested periods of the day or to other modes, may in turn enable more efficient investment, thus reducing the additional capacity that needs to be built.”

This Commission recommendation was unanimous (as all of its recommendations were). This is significant because the majority of the Commissioners were appointed by either the Bush Administration or by Republican Senate or House leadership (with the remainder by the Democratic House and Senate leadership).  And interestingly, it was the members appointed by Republicans who were the strongest supporters on the Commission for moving to a VMT, because they believed it would do the most to move our transportation system more in the direction of being shaped by market forces, rather than government.

Given this you’d think Cato would be leading the charge on switching to a VMT. But not Mitchell who decries a VMT system because it will 1) lead to higher taxes and 2) loss of privacy. Regarding point one, he conveniently overlooks the fact the federal gas tax has not been increased since 1993 and as a share of per-capita income it is 50 percent lower today than it was then. Regarding point two, he clearly doesn’t understand passive GPS systems which do not report back to anyone what the vehicle was doing.

But to understand why Mitchell is wrong, it’s worth reading a report by noted transportation export Randal O’Toole, titled Ending Congestion by Refinancing Highways. In this report, he argues that a VMT actually let’s local and state governments run transportation policy and get the federal government out of the picture. And that it enables road privatization and market based congestion pricing.  Moreover, the VMT fee systems tested in Oregon and Minnesota are designed to make it impossible for the government to know where people drove or when they drove there; the systems only transmit the amount of money people owe for using the street and road network.

Oh, did I mention that Randal is a Senior Fellow at the Cato Institute and is one of the most thoughtful free-market based transportation scholars in the nation? And that the report he wrote was published by Cato last month?

I don’t always agree with Randal (although I often do agree with him), but I always respect his intellectual rigor and thoughtfulness. And I certainly agree with him on the matter of VMT.

It’s too bad that some conservatives today let emotions rule their policy views instead of intellect and reason.  Maybe Mitchell should read Randal’s report. Or perhaps Cato should host a debate between Cato Scholar Mitchell and Cato Scholar O’Toole. But Mitchell’s not the only one. Fox News and some Republican members of Congress have come out against a VMT using the threat of big government.

This is the health care debate all over again.  For over a decade, it was conservatives who pushed for a requirement that people sign up for health care so that we could avoid a single payer government system. And we all know that when this became law, many conservatives, including many of the same conservative think tanks that led the charge for mandates, recoiled in horror.

Is this going to happen with VMT?  It looks like it will. But where’s the intellectual consistency?  Where’s the reason?

Speaking of reason, my colleague Bob Poole of the very conservative Reason Institute (another leading voice of rationality in transportation policy) says it all when he states in a post “Why Motorists Should Pay by the Mile” “replacing fuel taxes [with a VMT]  is not just about ensuring adequate, sustainable funding for the highways we all depend on. It is also the key to transforming what is now a poorly managed, non-priced, government run system into a 21st-century network utility.” Amen Bob.

So, to be clear, VMT is not something that big government liberals want, it’s something thinking small government conservatives (and good government moderates) want.

 

Image credit: Flickr user grendelkhan.

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About the author

Robert D. Atkinson is the founder and president of ITIF. Atkinson’s books include Innovation Economics: The Race for Global Advantage (Yale, 2012), Supply-Side Follies: Why Conservative Economics Fails, Liberal Economics Falters, and Innovation Economics is the Answer (Rowman & Littlefield, 2006), and The Past And Future Of America’s Economy: Long Waves Of Innovation That Power Cycles Of Growth (Edward Elgar, 2005). Atkinson holds a Ph.D. in city and regional planning from the University of North Carolina, Chapel Hill, and a master’s degree in urban and regional planning from the University of Oregon.
  • Bern Grush

    It is very unfortunate that reasoned study and argument, such as the 2009 document Paying Our Way, produced by the National Surface Transportation Infrastructure Financing Commission is read, understood and by now likely remembered by so few compared to the railings of a Larry Kudlow who cannot reasonably be expected to have examined its arguments.

    But, in my view, it is far more egregious that the Cato Institute cannot offer us a consistent view.

    If your voice, Rob, is to be steamrollered on a TV talk show, can we not at least expect consistent guidance from within our think-tanks?

    While we cannot expect everyone to agree with everyone, the majority of us who are not working within one think-tank or another would like consistent guidance from any one think-tank. It is not disturbing to have Cato and ITIF disagree.  But it is disheartening to have Cato and Cato disagree.

  • Bern Grush

    Rob, you point out that “the federal gas tax has not been increased since 1993 and as a share of per-capita income it is 50 percent lower today than it was then.”  In O’Toole’s report “Ending congestion by Refinancing Highways”, he states: “After adjusting for inflation, drivers today pay only a third as much for each mile they drive as they did in 1956, when Congress created the Interstate Highway System”. So the consistent lowering of the taxation of road-use is evident on all counts–contrary to the factually erroneous point Kudlow was making on his program.

    On the Wiki account describing Lawrence Kudlow, he is described as an Economist.  There is no excuse (besides ratings) for someone of his evident intelligence to so misinform his listeners. Until we have responsible journalism in this country, we can expect to remain confused and aimless regarding transportation, healthcare, environment and dozens of other critical matters for which we have almost no shared understanding.

    It is a shame that such a great country would stumble on such modest proposals.

  • ratkinson

    Bern, thanks for your comment. Yes, one would expect that a think tank like Cato would not have 2 completely diametrically opposed positions on an issue of this importance.