Should We Lean into a Federal Vehicle Miles Traveled Tax?: NMA E-Newsletter #643

Most experts agree that the way America funds infrastructure is broken. Many of our roads are in terrible shape. The Highway Trust Fund is nearly empty. Many local governments have difficulty paying for year-round road maintenance.

The reasons vary. The federal and state gas taxes have never been adjusted for inflation. Many states divert funds to use for other purposes such as transit and education. Automakers, the federal government, and at least one-third of state governments are pushing electric vehicles, which means no gas tax from those owners. Is a road user charge or a vehicle miles traveled tax the answer?

A VMT tax means that anytime you drive, you will be taxed by the mile. This would be in addition to the federal and state tax you pay per gallon of fuel at the pump unless you are operating an electric vehicle.

How the government will assess that fee is still up in the air. It could be a monthly charge based on vehicle tracking, which means some sort of GPS-based monitoring. Your ‘privilege of driving fee’ could be paid yearly at the same time as your license plate renewal is due and after a vehicle inspection. (How intrusive and expensive will that be?)

Other road user charges might come into play too. If drivers are tracked by location and time of day, they could easily be hit with a traffic congestion surcharge. Portland, Oregon, is currently running a VMT experiment through the end of the summer on how this might work.

Auto privacy would be a problem. Motorists would likely be tracked wherever they travel. Driving to a different state or even a different county might mean you pay different fees based on local assessments.

Whatever the case, the solution to assess a fee will not be as easy as paying at the gas pump as we do now.

The American Transportation Research Institute recently released a study concerning the costs of converting to a VMT tax system. The analysis indicated that it is much more complicated to track and collect taxes from a few hundred million vehicles than collecting fuel taxes from several thousand fuel operators. ATRI Senior VP Dan Murray told Transport Topics, “Suddenly, we go from spending $70 million a year in the US to manage the federal program to over $13 billion in a national administrative cost for the VMT program. It’s a massive scale.”

For example, to provide a dongle that tracks every vehicle in the US would cost an estimated $13.6 billion.

Collecting revenue from such a sizeable remote user group is a complex problem that, at the least, will create another costly layer of governmental administrative overhead. In the meantime, roads still need to be maintained.

In April, the US Chamber of Commerce joined with a collection of transportation and labor groups called on the US Congress for a national VMT tax to pay for infrastructure. They warned in a joint letter that the reliance on the federal gas tax is unsustainable, noting that tax receipts do not keep pace with constantly improving fuel efficiency and the growing presence of electric vehicles. A national VMT system, they say, could first be tested by federal and state fleets. The Chamber of Commerce and allies also suggest that the VMT tax would replace all current gas taxes and fees. (Does anyone really believe this?)

Meeting climate goals to reduce vehicle emissions has prompted several states such as California and Minnesota to work on various schemes to reduce vehicle miles overall. A road user fee would likely be used as a stick to get us out of our cars (especially if the gas tax is retained for internal combustion-engined vehicles, creating double taxation against most drivers).

Washington is the first state to legislate eliminating the sale of gas-powered vehicles by 2030. The state’s gas tax is already one of the highest in the country at 49.5-cents-per-gallon. Policymakers have added a road usage charge (RUC) to the current $15 million Forward Washington Senate Bill 5483. The proposed legislation narrowly defines the RUC as applying only to electric and hybrid vehicles but would open the door to levying a VMT tax on all vehicles in the future.

President Biden announced during the International Earth Day Summit that by 2030, he wants the US to cut emissions by at least 50 percent. He plans to electrify the federal fleet, including all postal service vehicles, but at present, the president has made no announcements for a government ban of gas-powered vehicles in the fleet even though pressure by anti-car forces has been ratcheting up.

Rural Americans, in particular, would feel the brunt of a VMT tax. Just as rural broadband programs have been difficult to implement, rural vehicle electrification will be costly if not impractical.

As of 2019, only 1.4 million plug-in vehicles (electric and hybrid) have been sold—out of 276 million vehicles registered in the US. Even though automakers are pushing EVs like there is no tomorrow, a recent study indicated that EV owners lack brand loyalty, aside from the cult-like following of Tesla. Non-electric car owners cite range anxiety, battery life, and the costs of buying an electric vehicle as a barrier to ownership.

The NMA has always supported the gas tax as the most practical and equitable method for funding highway infrastructure. Electric vehicle owners could be charged an annual amount covering their fair share of road and bridge upkeep.

A VMT tax would add billions of government administrative costs annually, open the door for the double taxation of most vehicle owners, create privacy issues for all motorists, and disadvantage rural communities. Lean into a vehicle-miles-traveled tax? Hardly.

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