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Mixed Messages on Auto Use

We wrote not long ago about the various negative externalities produced by driving — congestion, pollution, accident risk, etc. — and how pay-as-you-drive insurance might help impose the true cost of driving on each driver.

Now a reader named Larry Holt, the director of research of the Birmingham (Alabama) Regional Chamber of Commerce, writes in with an interesting point about a quiet incentive that encourages people to put on the miles:

I traveled to Atlanta last week for a conference, and as it’s nearby, I simply drove. So when I got back, I of course filled out my mileage report, and did pretty well: $159. We, like many other companies pay according to the I.R.S. mileage rates: 50.5 cents a mile.

It struck me though how much this flat reimbursement subsidizes our driving choices somewhat similarly to the free parking hypotheses.

It’s interesting that while at the same time the stated policy of the U.S. Highway Administration is to reduce congestion, you have another arm of the government, the I.R.S., continually bumping up the mileage rate. Here’s a link showing that it’s gone up from 36.5 cents since 2002.

One side note: With just about every U.S. airline in trouble and therefore resorting to cutting routes and raising fees, people will be even further incentivized to take long driving trips — even while gas prices continue to rise (though not nearly high enough for guys like this).

And here’s another case of mixed messages on auto use, or at least mixed incentives: The U.S. Department of Transportation has issued a press release saying that Americans have started to drive considerably fewer miles than before.

You’d think this would be mostly good news, right? Not quite: “That Americans are driving less underscores the challenges facing the Highway Trust Fund and its reliance on the federal gasoline excise tax,” said Acting Federal Highway Administrator Jim Ray.