A New Way to Drive Tax Revenues

Your Guide to State, Local, Federal, Estate + International Taxation

The I-95 Corridor Coalition is testing out a new way of collecting tax revenues. With the ever growing popularity of fuel efficient vehicles such as electric cars and vehicles touting high miles per gallon, states are having a hard time coming up with enough revenue to fill the budget for road repairs and rest areas. The more people that invest in more efficient vehicles the less money the state has for the upkeep of roads.

The new proposed tax would be enforced by having a device installed in your vehicle that will track the miles that are driven using GPS. Think of it as a Fitbit for your car. The tax would lower the price of gasoline by getting rid of the state gas tax but cost drivers 1.5 cents per mile. If a driver is unwilling to let the government track their driving activity, there is an option to pay the tax based on a yearly mileage of 30,000 miles (which seems like a higher number of miles than most people drive in a year.)

The Coalition represents Connecticut, Delaware, New Hampshire and Pennsylvania, but these are not the first states to look into this solution to decreasing tax revenues. Oregon and California have already put in similar proposals that are in the testing stage. Each of these states has taken 5,000 volunteers and placed the device in their vehicles. They are using the data to see if this would indeed be a profitable solution. Illinois lawmakers have also tried to implement this tax but were met with such hostile disapproval that it has been shelved until a more agreeable solution could be found.

The main issue that drivers are having with this proposed tax is that it is being looked at as an invasion of privacy. They are seeing this as a way that the government can follow them and know exactly where they are at all times. Some drivers have even gone as far as to say that they can see the government eventually using the GPS feature to track what restaurants they are at and assessing extra taxes for stopping at fast food restaurants. This comes in light of the soda tax that Philadelphia has just put into place to help promote a healthier population.

These mileage taxes are still in a testing phase. However, if the extra revenue outweighs the cost of the devices, I wouldn’t be surprised if more states started adopting this strategy as well.

By Joanna Yergler