Tag Archives: mileage rate

California Proposal for Mile Tax to replace Gas Tax – Part 2 – Side-Effects of Fuel Economy and Inflation

26 Jan

This is Part 1 of “Exploring a Road Usage Charge as an Alternative to the Gasoline Tax” released by CalSTA (California State Transportation Agency).

Effects of Vehicle Fuel Economy

New Corporate Average Fuel Economy (CAFE) standards, alternative fuels, and the rise in the popularity of electric vehicles, combine to create a rapidly deteriorating funding situation. These are positive results from other statewide policy initiatives, but the primary state transportation revenue source for maintenance and operations has been the flat-rate excise tax of 18 cents placed on each gallon of gasoline sold. While sales tax (later replaced with a “price-based” excise tax) was shifted to transportation beginning in 2000, only the base 18 cents provides funding for “fix-it-first” activities including maintenance and rehabilitation of the state’s transportation system. The excise tax has long been used as a proxy for a user fee, but as vehicles become more efficient, this proxy is becoming less effective.

calsta - revenue loss due to increases in fuel economy

The emphasis on increased fuel economy is undeniably desirable. From an environmental and energy policy standpoint, decreased fuel consumption reduces greenhouse gasses and our dependence on a finite energy source. However, as we strive to reduce fuel consumption, we undercut the primary funding source for repair of the roads that all cars, trucks, and busses rely on – regardless of the energy source that they use, or how efficient the vehicle they drive is. There is no equitable means to mitigate these effects so long as we continue to rely on the antiquated per-gallon excise tax.

By 2030, as much as half of the revenue that could have been collected will be lost to fuel efficiency. If that sounds farfetched, consider that 20 years ago in 1994, the average fuel economy of cars on the road in the United States was just around 20 miles per gallon (MPG); today the average efficiency of new cars sold exceeds 35 MPG. By comparison, 35 MPG was the average fuel economy of all passenger cars sold in the European Union (EU) in 2001, and by 2011 it had increased to 42 MPG, with average highway ratings exceeding 50 MPG. As new, more efficient, cars replace the older models, the effect on consumption and average fuel economy of the fleet will increase rapidly. On the other hand, revenue from the gas tax will decline dramatically. Estimates suggest that the decrease in revenue due to fuel efficiency will soon outpace even the negative impact of inflation.

Complicating the issue somewhat is the interaction of increased fuel economy with the use of diesel fuel that is taxed at a lower rate than gasoline. The market share of diesel passenger vehicles in the United States is currently around 1 percent. Based on experiences in the 1980s drivers in the United States have been soured on diesel cars, viewing them as noisy, dirty, and unreliable. But modern diesel systems are touted as clean, powerful, and fuel-efficient. In the EU, 55 percent of passenger cars sold in 2011 were diesel-powered. Because modern diesel cars are more fuel efficient than gasoline-powered equivalents, this move to diesel power has helped the EU to achieve outstanding average fuel efficiency and commensurate greenhouse gas reductions.

Recent years have seen the marginally successful re-entry of diesel passenger cars into the United States market, and estimates by some expert sources indicate that the market share of new diesel passenger cars sold could increase to 10 percent by 2020. But, because diesel excise tax was reduced to 10 cents per gallon (from 18), a shift in fuel source would negatively impact transportation revenues available under the existing tax structure.

Effects of Inflation

Even absent changes in tax revenue due to fuel efficiency, the state faces another losing proposition in the excise tax: inflation. The base excise tax, which provides the funding for the maintenance of our highways and local roads, has remained unchanged since 1994. This rate has been in place for 20 years, despite significant increases in project construction costs. Since that time, despite the economic crisis of 2008, the buying power of the tax has decreased about 42 percent in terms of construction costs. To flip that around, if the base 18 cents-per gallon tax had been indexed to inflation back in 1994, it would be about 31 cents per-gallon today.

calsta - what is the gas tax worth

The chart above illustrates how inflation has reduced the purchasing power of 1994’s 18 cent gas excise tax to the equivalent of a 10.5 cent tax. A further adjustment for increased VMT would reduce the purchasing power to the equivalent of 9.0 cents per gallon (half the value).

The effects of inflation must be addressed if California is to be successful in both improving the condition of transportation infrastructure and maintaining the improved condition. The means of doing so is tie the tax to an index that changes with the cost of goods and services. The Consumer Price Index may be the most well known, but the Producer Price Index, or even the California Highway Construction Cost Index are more consistent with construction price changes.

The gasoline excise tax was raised multiple times between its initiation in 1923 and the last increase in 1994 to account for the effects of inflation. Indexing annually for inflation can alternatively be authorized and reduces the purchasing power erosion between longer-term adjustments. Regardless of the type of long-term solution implemented to provide appropriate funding for transportation, the effects of inflation must be surmounted and annual indexing considered.

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California Proposal for Mile Tax to replace Gas Tax – Part 1 – Current Transportation Charges

26 Jan

This is Part 1 of “Exploring a Road Usage Charge as an Alternative to the Gasoline Tax” released by CalSTA (California State Transportation Agency).

Background

Gas taxes pay for highways, local roads, bridges, busses, trains, and even active transportation. However, the current per-gallon tax structure is untenable in the long-term as fuel efficiency increases.  Although total Vehicle Miles Traveled (VMT) are expected to increase over time, the projected sale of gasoline is expected to decrease dramatically due to increasing fuel efficiency of the vehicle fleet.  One alternative funding approach to this problem is a Road Usage Charge, which is charged on the number of vehicle miles traveled.  This may be a more logical and fairer method of paying for state highway needs in light of high fuel economy and electric drive vehicles.  It is also a direct charge for usage of the transportation system with a clearer nexus between payment and use.  As a new and widely untested alternative funding approach, many questions must be answered prior to any wide-scale changes.  This whitepaper describes the need for a stable revenue source that will address the twin funding problems of inflation and increasing vehicle fuel economy, and some of the challenges therein.

Transportation Infrastructure Charges Relative to Other Services

With perhaps the notable exception of Warren Buffett, nobody publicly admits to wanting to pay more taxes.  Nonetheless, the state’s transportation infrastructure represents an essential component of modern life, and its existence and function relies on some sort of user payment. The transport of people, food, and consumer goods – not to mention vital emergency services – would not be possible without the state’s integrated transportation system.  Though no official number exists, it is roughly estimated that the transportation system in the state is valued in the neighborhood of several trillion dollars; yet users of the system generally pay far less for use of the system than for many daily luxuries.

calsta - average annual cost of select items

The average driver pays just $368 annually in gasoline taxes, including all state, local and federal taxes. Yet, consumers would likely be surprised to find that their annualized payments for use of highways and roads are only about one-third of the cost of their cable bill. This lack of perspective makes it very difficult to engage in any conversation about paying for infrastructure.

The current tax system is a consumption tax.  It is constructed in such a way that leads consumers to think of the taxes on gasoline as a tax for the purchase of gasoline, not on the usage of the roadway network. This somewhat circular logic is perpetuated by the fact that the taxes on gasoline are just a proxy for a tax on the use of the transportation system.  The direct link between use of the system and paying for that system does not exist.  A useful means of guiding this discussion is to shift the focus from a tax, to a charge for use of a crucial utility, just as people think about their use of electricity, water and internet access.

Mileage Rate for 2013 is $0.565

22 Nov

The IRS announced that the standard mileage rate for 2013 is increasing to$0.565 per mile.  In 2011 and 2012 the rate was $0.555.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56.5 cents per mile for business miles driven.
  • 24 cents per mile driven for medical or moving purposes.
  • 14 cents per mile driven in service of charitable organizations

MileLogr makes it amazingly simple to get mileage logs that let you take advantage of this tax deduction. It connects to your online calendar and uses your appointment information to generate the mileage logs.

You can try MileLogr for free now at www.milelogr.com.

Read more on the IRS Standard Mileage Rates for 2013 here:

http://www.irs.gov/uac/2013-Standard-Mileage-Rates-Up-1-Cent-per-Mile-for-Business,-Medical-and-Moving