Oregon’s ‘GPS Tax’ Raises Privacy, Efficiency Worries

Published March 1, 2009

Oregon officials are seeking to equip all vehicles licensed in the state with global positioning systems in an effort to fill a budget gap caused by falling gasoline tax revenues. Experts warn the technologically advanced taxing system would be counterproductive.

Gasoline tax revenues are down in Oregon because total driving is down and consumers are opting for more fuel-efficient vehicles. The GPS systems would measure the miles an Oregon resident drives, providing the basis for a proposed usage tax.

Such a system could discourage the use of more fuel-efficient vehicles and raise privacy questions because the government would have full access to a vehicle’s position at any given moment.

Defending Drivers’ Privacy

“This is a great example of the problems that often arise when trying to bring into the digital age areas of the economy monopolized or dominated by government,” said Berin Szoka, a fellow at the Washington, DC-based Progress & Freedom Foundation and director of its Center for Internet Freedom. “I wouldn’t want the government to have access to my car’s location at any given moment or a complete record of where I’ve driven.

“It would make a hell of a lot more sense for drivers to pay for road use depending on where, when, and how far they drove—as in a small pilot project in the UK,” Szoka added.

Szoka said state and federal taxes on every gallon of gasoline are intended to serve two conflicting purposes “but do a poor job with both.”

“The taxes fund the cost of building and maintaining roads. But the tax provides only a very rough proxy for how much driving Americans are doing, and says nothing about which roads are actually being used or when,” Szoka said. “So government road planners have to guess at which roads need to be upgraded or where new roads are required.

“Worse, the current system does nothing to encourage rational decisions on the part of drivers, who currently have no direct economic incentive, other than saving time, not to drive during rush hour or to use less-congested roads,” Szoka added.

Causing More Problems

The Oregon proposal is just a short-term fix to one problem that will cause others, namely inequitable taxation and privacy risks, said John O’Dell, senior editor of Edmunds’ Greencaradvisor.com, an automotive blog dealing with environment issues.

“It’s the wrong way to go about replacing falling gas tax revenue,” O’Dell said. “In most states, gas taxes are used primarily to keep the road system working. If that is what you are trying to accomplish, [the Oregon plan] is going about it in all the wrong ways. It’s a quick, easy, short-term solution, which is why legislators like it.

“The problem we see is that this has nothing to do with the wear and tear on roads, which comes primarily from the weight of the vehicle and the type of tires,” O’Dell said. “A Hummer does a lot more damage to the road than a motorcycle.”

Under the Oregon plan, O’Dell noted, the taxes on each would be the same.

Calling for Emissions Tax

The current tax system is what economists call “Pigouvian,” Szoka said, meaning it is intended to compensate for the negative externalities—such as air pollution—caused by driving. But taxing total gallons of gas consumed is a poor proxy for emissions, he notes.

Cars are already sufficiently computerized, he said, that if government really wanted to punish pollution through the tax system, it could directly tax emissions by having each car keep track of unhealthy emissions and then uploading that data at the car’s annual inspection.

“So in a rational world, we’d abolish gasoline taxes entirely and institute user fees to fund the cost of roads and highways that reflect actual use,” Szoka said. “If government insists on it, we could also tax emissions directly.”

Contemplating Competition

If roads weren’t run by government monopolies, this kind of change would have happened a long time ago, Szoka says.

“Although many people associate toll booths with road privatization, no private business would ever choose a technology as cumbersome—and costly—as toll booths if they had the option of using a system as seamless and invisible to the user as GPS tracking,” Szoka said. “Some drivers might still be uncomfortable with the idea of a private company having access to their driving data, but that private company would have a strong incentive to compete for privacy-sensitive drivers by offering strong data protection policies.

“But because government has virtually monopolized the road system, we’re stuck with a terrible choice: Continue to use a ‘pricing’ [tax] system from the 1950s, or risk putting the data created by modern technologies directly into the government’s hands,” Szoka added.

Re-Nationalizing Industries

It will be particularly difficult to implement market solutions when government policy is going in the opposite direction, Szoka says.

“I don’t know what the right answer is—other than privatizing the roads, enforcing corporate privacy policies strictly under existing law, and increasing Fourth Amendment protections against government access to user data kept by companies.” Szoka said.

“Since road privatization is unlikely to happen, I suspect that we’ll end up having to choose either technology, with all its benefits, or privacy. But we should be able to have both,” Szoka added.

Phil Britt ([email protected]) writes from South Holland, Illinois.