VMT Tax in the Netherlands

It’s well-known that the national highway fund is running low on cash and does not receive enough funding from existing fuel taxes; one controversial proposal is to tax vehicles based on the number of miles traveled instead of gallons consumed.  Eleven weeks ago, I came out against this idea because I felt it will be a blunt instrument with dubious benefits.  I did say, however, that “I see two obvious benefits: a VMT tax could charge drivers less for taking side streets and less used highways and for travelling on certain types of roads.  Yet those two benefits do not seem worth the cost of implementing a VMT.”

On the other hand, the Netherlands is trying to switch from a fuel tax to a VMT tax.

The government’s proposal is to tax vehicles at $.07/mile now and $.16/mile by 2018.  According to the Transport Ministry, the tax will vary based on the type of car, weight, and where it is driven.  A key difference between that plan and ones talked about for here is that the Dutch government wants to use the VMT tax to replace the current sales tax on new cars.  Removing this tax seems like a good idea because it allows the government to more accurately tax those who cause the most negative externalities; just because I buy a new Civic does not mean I will pollute as much as my neighbor in his Civic, so I should not have to pay the same taxes.

My original objections stand, but it will still be interesting to follow how the plan develops and any benefits that result.