Mileage Tax – An Idea Whose Time Has Come?

Over on The Province, I read an article about bridge tolls and their perceived unfairness. Rather than try to fit my thoughts into a comment on that article, I’ve decided to write a blog post. Some things to keep in mind as you read my ideas:

  • These are ideas in raw form – There are probably implications I’ve not thought of
  • I’m open to constructive criticism
    • In addition to the unfairness of making those who live South of the Fraser pay bridge tolls, we must also think of the future. Down the road, as electric cars or alternate fuel vehicles come on the market, there will be fewer drivers to pay gas and carbon taxes at the pump. It’s time to start thinking about a fair replacement tax solution. I think we can all agree we need adequate funding to pay for the roads & bridges we all use. The only fair method to fund road building & maintenance is with a road-pricing system.

      I think both gas taxes, and the portion of income tax used for transportation projects should be eliminated and replaced with a mileage tax. Some thoughts & ideas:

      • Gas taxes and road funding from income tax would both be eliminated. All tolls would be eliminated. The goal is to create a revenue-neutral road construction & maintenance fund in the first year. After the first year, the fund should be indexed inflation.
      • A per-kilometer mileage tax rate would be set by the government.
      • The mileage tax needs to take into account vehicle size – motorcycles pay less than passenger vehicles, which pay less than transport trucks.
      • The Carbon tax would stay on the sale of gasoline as it is intended to reduce fuel consumption and carbon dioxide emissions, not fund transportation.
      • When a vehicle is registered, its odometer reading would be recorded. When it is re-registered the next year (or when its sold or written off), the mileage tax would be calculated and any owing the taxes paid. Alternately, an in-car mileage monitor could be installed when your car is registered.
      • The mileage tax would be payable monthly so people don’t get hit with a major tax bill at the end of the year. Drivers would need to have an idea of how many kilometers they drive in a year to set up their monthly payments.
      • The tax should apply to all vehicle owners in BC, no exemptions for any reason – if you use the roads, you pay the taxes to fund those roads. Transit operators will also pay the tax and fares will include the amount. Everybody who uses roads and lives in BC will pay the tax to some extent. I’m not sure how to handle Out-of-province visitors, but maybe they could pay a small per-day toll somehow. Not sure how to handle that.
      • The tax will become the sole source of funding for road construction & maintenance.
      • The majority of the road funding raised via the mileage tax would be used in the region in which it was raised. New road regions would need to be created to best-target the funding. (ie. Metro Vancouver, Eastern Fraser Valley, Capital Region, Central Vancouver Island, Northern Vancouver Island, Western Vancouver Island, etc…).
      • A portion of the road funding would be used to fund the province-wide highway system.
      • Any excess funding in the first year would be returned to the tax payers, and the mileage tax rate adjusted. From then on, the mileage tax rate would be indexed to inflation. The mileage tax fund would be required to bank funds to pay for replacement of existing infrastructure in the future. So a project to replace the Massey Tunnel with a bridge would be funded from the mileage tax replacement fund.
      • Each region of BC would then have a known budget for road funding every year. Where there are more drivers, there is more funding. Funds raised in one calendar year will be spent in the next calendar year.

      An example:
      Let’s say I drive 30,000km/year and live in Abbotsford. That means I pay 14.5¢/L in provincial gas taxes. Assuming gas prices of $1.00/L, there would be an additional 7¢/L in (7% PST). This brings the BC taxes to 21.5¢/L. I get 10L/100km in my small SUV. So, I use 3000 L of gas. All this means I pay $645/year in provincial gas taxes. Let’s say my income was around $50,000. My BC Income Taxes would be around $2200 (without any deductions). If I’m reading it right, the 2015 BC Budget says that 25% of the budget goes to transportation, which means $550 of my taxes goes to transportation. This brings my annual transportation tax for BC (not including the federal government) to $1195. $1195 in taxes divided by 30,000 km means an equivalent per kilometer mileage tax rate would be $0.0398. My monthly BC mileage tax payment would be around $100.

      It would be possible for the Federal Government to join in on this plan too. Going back to my example:
      I pay 10¢/L in federal gas taxes, plus 5% GST (5¢/L) for a total of 15¢/L. That means I pay an additional $450 in Federal Gas Taxes. According to the Department of Finance’s Your Tax Dollar document for 2013-14, 6¢ per dollar of taxes goes to the Gas Tax Fund. So, 6% of the budget. Federal income tax on $50,000 would be around $5700 assuming no significant deductions, which means $342 of my taxes goes to transportation. This brings my annual transportation tax for Canada (not including the BC government) to $792. $792 in taxes divided by 30,000 km means an equivalent per kilometer mileage tax rate would be $0.0264. My monthly BC mileage tax payment would be around $66.

      All told, my “road pricing” fees would be $166/month. There would no longer be any gas tax, bridge tolls, or income tax going to transportation. Instead, I would pay $166 amount each month to use the roads in this country. I would stop crossing the border to buy cheaper gasoline. My wife would save over $120/month in bridge tolls on the Port Mann Bridge. Her monthly “road pricing” fees would be higher since she drives further, around $177/month by my rough estimating. This works out to around $0.0607 per kilometer, combined BC and Canada Mileage Tax. This compares fairly closely with my example combined rate of $0.0662.

      My guess is that most people will fall in the 6¢ to 7¢ range outside of Metro Vancouver when performing a similar calculation. Inside Metro Vancouver it will be higher because they currently pay more in Gas Taxes, which also means more GST and more PST (taxes on taxes, GAH!). From these types of calculations, the government would be able to figure out a fair rate for all British Columbians to pay that would fully cover road construction & maintenance. Rates could vary per region, but any extra income from higher rates in a region would be expected to go back to projects in that region.

      When you eliminate the tolls on the bridges, people will go back to taking the most effective route to get to work as well, which reduced traffic jams which thus reduces carbon dioxide emissions. It also means less time sitting in traffic, which means everyone gets home to their families sooner. A mileage tax makes everyone aware of how much “road” they are using. If they don’t like what they’re paying, they can move closer to work. It also helps people figure out if they want to live in Abbotsford and pay the extra Mileage Tax to drive the extra distance, or if they could redirect some of their mileage tax into a mortgage or rent payment closer to work.

      Well, I hope you made it through my rambling. I think this is an idea whose time has come. What do you think?

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