I don't know why "tax by mile" proposals appeal to so many people. It'd be costly to implement and a likely heavy invasion of privacy, and for what?
We tax gas consumption for two main reasons: 1) to raise revenues and 2) because there are external costs to driving - pollution, congestion, and road wear and tear.
If states are worried about falling revenues due to better mileage, then they can just raise the gas tax.
If you tax by mile instead of by gallon, you reduce the incentives to buy cars with better mileage. Pollution would tend to increase. Cars with worse mileage tend to be bigger so they contribute to congestion more. And, bigger cars do more damage to the roads.
The gas tax isn't a perfect tax -- to reduce inefficient congestion peak period pricing is necessary. But, that can be implemented using EZ-pass type systems on certain roadways on top of the gas tax.
