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Friday, July 10, 2015

Road Funds Part 5 - Tire Tax


In this series we're exploring different ways that Oregon could possibly fund roads as the gas tax revenue decreases. Each idea is scored against the criteria we defined in part 1.

One of the ideas that's been proposed is a tire tax. Today's gas tax averages about 1.5 cents per mile. Passenger car tires generally last 30 to 50 thousand miles, so the tax would be $450 to $750 for a set of 4 tires. That is about $100 to $200 in tax per tire. Given that tires generally cost $90 ±, this is more than a 100% tax.

Paying for tens of thousands of miles of state road taxes on day 1 of a tire purchase is prohibitive and could more than double the price of the tire. Charging more than 2X for tires in Oregon would encourage people to find a way around the tax. Tire sales over the border in surrounding states and online would spike while the tire market in the state would likely collapse.

I find this to be an impractical method of excising a tax. Despite this, let's run it through our scoring and see where it lands.  

Road fund taxes/fees should:
1) Have some correlation to road wear
2) Not be excessively regressive
3) Provide adequate funds for transportation maintenance needs
4) Be simple to pay
5) Allow for collection without invasion of personal privacy
6) Allow for out-of-state travel without paying in-state road fees
7) Tax drivers from out-of-state when they are using Oregon roads


1) Correlation to road wear - 100 points
Tires wear with use, so there is an excellent correlation.

2) Regressive Tax -  20 points
This tax is not based on income, property, or even the tire cost.

3) Provide adequate funds -  100 points
Assuming the taxes were actually paid (which is a big assumption), this tax could replace the gas tax.

4) Simple to pay - 30 points
The simple model is that you just pay the tax when you buy the tire. On the surface, it seems simple. There is no additional information or tracking required. But looking deeper, there are many complications to this tax. If a tire gets punctured soon after you buy it, do you get a refund of the tax? If so, who assesses the miles driven on that tire? If tires are retreaded, do you have to pay more road tax?

5) Privacy - 100 points
Buy a tire, pay the tax. Just like any sales tax, no personal information needs to be collected.

6) Out-of-state travel - 0 points
Once you have bought the tires, you have paid the tax. It does not matter where you travel, you would not get a refund for miles outside of Oregon.

7) Tax out-of-state drivers - 0 points
It is unlikely that any but the most desperate travelers would buy tires in Oregon if they have a very high road tax.

Adding it up, the Tire Tax only scored 350 points on our scale, making it the lowest scoring option that we have examined yet.

Scores so far:
 raising the gas tax 520 points
 increasing property taxes 380 points
 increasing vehicle registration 380 points
 tire tax 350 points

Toll roads, congestion zones, and many other ideas are still to come.