Extras on Excise: Will the OReGO Program Be a Green Light for Other Mileage-Based Tax Programs?


With gas tax revenues on the decline and states looking to find other sources of transportation program funding, mileage-based tax programs are one option that states are testing out to determine whether they will be a viable alternative to traditional fuel taxes. 

One such program, OReGO, will officially launch on July 1, when Oregon residents can volunteer to participate in the nation’s first program to tax miles driven. (Interestingly, Oregon was also the first state to implement a gas tax back in 1919.)

OReGO is just a pilot program at this point, so participants still have to pay the state’s $0.30 fuel tax when they gas up their vehicles. But they will get a credit on their OReGO bill for the amount of fuel tax paid. 

Here are some more details: 

  • Individuals can volunteer to pay the road usage charge of 1.5 cents per mile (mileage is recorded with a device connected to the vehicle)
  • Volunteers will get a credit on their bill to offset the fuel tax that they will continue to pay when they gas up
  • Up to 5,000 cars and light-duty commercial vehicles may participate (sign up officially starts July 1) 

While Oregon is the first state to implement a large-scale program to test a mileage-based tax system, a couple of states have worked on smaller projects and several states have enacted or considered legislation allowing studies of mileage-based taxes (also called road usage charges or fees). 

According to a report by the Council of State Governments, Minnesota and Nevada both tested road usage fee programs during the 2011-2012 period. A multi-state study of mileage-based charging systems concluded in 2010. 

Washington enacted legislation in 2012 authorizing a study of road usage charges. A final report by the Washington State Transportation Commission was published in December 2014 (WSTC). The WSTC suggested four methods for instituting a road user fee demonstration program:

  • Method A – Time Permit – unlimited driving for a specific time period (likely 12 months) for a flat rate;
  • Method B – Odometer Charge – prepayment of miles for a given year with reconciliation at the end of the year based on actual miles driven (according to the vehicle odometer);
  • Method C – Automated Distance Charge – postpayment for miles driven on a periodic basis, as measured by an in-vehicle mileage reporting device (this method is similar to OReGO); and
  • Method D – Smartphone Distance Charge – prepayment for miles driven as measured by an individual’s smartphone via a special application.

California and Indiana enacted legislation in 2014 and those states can now study mileage-based fee programs for the next couple of years before determining whether they should implement a mileage tax program. California is required to implement a pilot program by Jan. 1, 2017. 

The Colorado Department of Transportation is also looking at mileage-based taxes, which it calls a vehicle miles traveled (VMT) fee.

Arkansas, Florida and Massachusetts considered mileage tax program legislation in 2015, although none was enacted.

Several coalitions have also been formed to research the issue, including the Western Road Usage Charge Consortium (WRUCC), the Mileage-Based User Fee Alliance (MBUFA) and the I-95 Coalition. Members of the WRUCC include Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Texas and Washington. 

Agencies from Connecticut, Delaware, D.C., Florida, Georgia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York and New York City, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont and Virginia are members of the I-95 Coalition.

With so many states studying mileage or road-usage taxes or fees, will OReGO serve as the green light for these programs? 

Maybe. 

A Mason-Dixon Polling & Research telephone poll of 625 registered Oregon voters showed that 56 percent opposed the mileage tax as an alternative to existing fuel taxes, according to an article published in Bloomberg BNA’s Weekly State Tax Report

Even so, all eyes will be on the OreGO program as participants provide feedback about their experiences and Oregon looks at revenue potential from a mileage tax, particularly with California and Washington poised to start similar programs within the next couple of years. 

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you think that mileage-based tax programs are a viable option to replace waning fuel tax revenues?

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