As Oregon Goes, So Goes The Nation?

June 13, 2006

What happens when the expanded use of fuel efficient vehicles leads to a reduction in the usage of gasoline? Some in Oregon are not pleased with the outlook of this scenario, because it would lead to a reduction of government revenue through various forms of gasoline taxes.

Oregon was the first state to adopt a tax on gasoline in 1919 and may just be leading the way again. Oregon is set to experiment with a “mileage tax” and if successful, it could pave the way for new forms of transportation taxes nationwide. From the AP:

“If a test drive of mileage-based fees for drivers pans out during the next 10 months, it could replace Oregon’s gas tax and serve as a national model for road funding in the future.Oregon’s 24 cents-a-gallon gas tax, which is used to fund roads, has not increased since 1993. Some at the state Department of Transportation say the money could dry up in future years as hybrids and other fuel-efficient cars become more popular. So the state is investigating other alternatives to pay for roads.The mileage-fee project was designed by engineers at Oregon State University. The system works by using a global positioning system in a car to determine the number of miles traveled inside and outside of Oregon and at what times, which could lead to peak driving-time fees. When the car pulls into a service station, a radio transmitter sends the data to a reader in a gas pump. The mileage fee is added to the bill, and the gas tax is subtracted.” [Full Story]

This story from Oregon is a perfect example of how technological developments in the 21st Century are making various forms of taxation obsolete in today’s marketplace. Professor Richard Wagner wrote an excellent Tax Foundation study on this subject, which can be read here.

To read Tax Foundation research on gasoline taxes, click here.

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