Now the Government Wants to Track and Tax Your Mileage

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I love Oregon so much I gladly put up with its hypocritical governor, its out of control budget, its quirky liberal tendencies, its high personal income taxes, its hopelessly anti-business environment, and its progressive health care system.

But here's where I have to put my foot down: Oregon officials are now proposing a special per-mile tax on "gas-sipping" drivers.

Frustrated by the drop in tax revenue collected at the pump as drivers shift to more fuel-efficient hybrids and pure electric cars, Oregon legislators now want to make up the difference by sticking it to anyone who's willing to pay more for energy efficiency.

And as bad as that sounds, there's every reason to believe that if this takes hold, a mileage tax will be in the express lane to your neighborhood soon.

Washington's already got a law on the books that will require electric vehicle owners to pay a flat annual fee and is considering an additional per-mile tax. And Nevada is now also looking at a per-mile fee, despite all its gambling revenue.

I don't know about you, but this kind of nonsense makes me want to go out and buy a fire-breathing V8 or fusion-powered DeLorean like Doc Brown drove in the hit movie series Back to the Future just on principle alone to replace my 2006 Prius.

I thought energy efficiency was a national priority.

Welcome To a Place Called Oregon

Then I thought: how silly of me. This is Oregon, where the wisdom of our legislators seems to more closely resemble government at the expense of the people rather than for the benefit of the people.

For example:

  • Oregon drivers aren't allowed to put gas in their own cars on the grounds that drivers are somehow so incompetent that we can't do it. Actually, that's only one of the 17 reasons listed in the self-pump statute (ORS 480.315), which cites other things like protecting small children in the cars or preventing spills. Even preventing the elderly from "unreasonable discomfort" is evidently rational in the name of keeping full service -- never mind that the person driving would presumably have had to get into the car in the first place.

Millions of Oregonians, as a result, frequently pay about 5-10 cents more per gallon on average for the "privilege," by the way. The fine is about $500 bucks if you're caught fueling up by yourself. Mind you, this is a place where self-serve suicide with a doctor's help is perfectly legal. That just kills me, pardon the pun.

  • Oregonians are required to put ethanol in their tank whether they want to or not. So are you, if you live in the United States. Congress mandated increases in ethanol concentration up to 15% way back in 2010, despite the fact that ethanol actually increases premature wear and tear on engines, causes a 3-5% drop in mileage and produces higher overall vehicle repair bills for owners. At least we'll breathe easier on our way to the fix-it shop.
  • The Oregon Department of Transportation (ODOT) encourages the use of studded tires despite the fact that they cause more than $40 million in damage to Oregon roads every year, according to the very same Oregon Department of Transportation. ODOT has also tested studded tires in wet conditions (you may have heard it rains a bit here) and found that studded tires are not as safe because they don't grip the road like regular tires. Imagine that.

While the mileage tax story here is news, apparently Oregon's been quietly working on this cockamamie scheme for more than a decade in an effort to figure out how to get drivers to pay even more.

Obviously, they could have been working on incentives or alternatives, but saving money hasn't occurred to these guys. That's sad considering there's plenty of low-hanging fruit to choose from, like reining in the $32 billion tax breaks it gives away every two years -- 378 different kinds.

Evidently the absurdity of giving away more in tax breaks than the state collects in taxes has not dawned on our state legislators any more than it has their federal counterparts.

Local station KATU reports that Jim Whitty of the Oregon Department of Transportation says it's unfair that everybody uses the roads but not everyone pays for them -- a thinly veiled dig to those who drive traditional gasoline-powered vehicles and those who drive more fuel-efficient transport.

But how about the people?...

Government is supposed to exist for their benefit, not yours Mr. Whitty. Taxes can be offset by responsible spending. What a concept.

The Unintended Consequences of a Mileage Tax

As far as I am concerned, boneheaded moves like this one are going to put yet another roadblock to more fuel-efficient motoring and create a distinct disincentive to buy fuel-efficient cars. Last time I checked, energy independence was a national issue that played heavily in the most recent election cycle just as it has for years.

Oregon and other state governments should be creating special incentives for both consumers and manufacturers to build and sell increasingly fuel-efficient vehicles. Everyone who purchases one should receive a tax break, or better yet a cash incentive directly in their pockets.

Manufacturers that build them should receive a cash award for every one sold. Forget the special tax treatments that are out there presently. Those are merely loopholes to be exploited by big business rather than benefiting consumers who so desperately need this technology right now. Not 10 years from now ...but now.

While we're at it, let's not forget that vehicle licensing fees were initially created at least in part to "pay for the roads." A return to that, combined with rational spending, could easily balance road budgets. So could tolls, for that matter. Then it wouldn't matter what you actually drove ...car, SUV, fire-breathing big rig, motorcycle or even a Batmobile.

And, finally, there's privacy.

Oregon's leaders think its citizens will be peachy keen on having GPS mileage-reporting devices required on anything we drive, or to be tracked via smartphone technology.

That will go over like a lead balloon, but you can bet this, too, is coming soon to a neighborhood near you. Once the government gets its hands on data, it's not going to back off. In fact, it's only going to get worse.

The administrative costs of this program, like many government initiatives, are expected to outstrip additional revenues for years. Like that's a surprise.

But that's okay according to the pilot program's test participants, who not surprisingly were primarily Oregon transportation officials and legislators. The preliminary tracking systems were "scary accurate" according to Oregon Transportation Commissioner Mary Olson. You can bet she likes that since she'll know where to extract her Department's pound of flesh, because ODOT will know where their drivers are ...and aren't.

In closing, there are a couple of key takeaways here:

  • Cash-strapped legislators in every state will put their own interests first to ensure their survival rather than public benefits. The gas-sipper tax is but a small sliver of what's going to play out across the country in the next few years and in a variety of industries. Unable to live within their means, more government will just create more government and somebody – a.k.a. you and me – will be forced to pay for it all.
  • Knowing the public is reaching a boiling point, 'they" will develop additional taxation programs and spring them on an unsuspecting public increasingly at the last minute or as part of some last-minute "bipartisanship." There's nothing bipartisan about this. All the last-minute histrionics are an embarrassment, despite what the majority of self-involved politicians think.
  • These supposedly preventative programs will actually harm the public they purport to protect. Famed Austrian free market economist Ludwig von Mises noted in his 1944 work, Bureaucracy, that this is because government leaders insulate themselves. They call themselves progressives, Mises noted, but really "recommend a system that is characterized by ridged observance of routine and by a resistance to every kind of improvement."

Not that any of this is a surprise.

Mises also noted that bureaucracies are socially self-interested and completely irrational when it comes to economics that could actually improve the public's welfare.

If these kinds of policies rub you the wrong way, please contact your elected officials. Don't forget, they'd rather support their constituents than risk being "un-elected."

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About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He’s a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean.

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