A By-the-Mile Tax on Driving Gains Steam as a Way to Fund U.S. Roads
(Bloomberg) -- President Joe Biden’s drive to increase electric car use may unintentionally thwart his other urgent priority to restore the nation’s roads, bridges and transit systems by undercutting federal gasoline tax receipts.
That’s got U.S. Transportation Secretary Pete Buttigieg taking a serious look at an idea that’s drawn fierce opposition from privacy advocates and others: funding highway projects with a fee based on how many miles someone travels instead of how much gasoline they pump.
“Maybe more than at any point since the gas tax was instituted, it feels like so many different possibilities are on the table,” Buttigieg said in a recent speech to the American Association of State Highway and Transportation Officials.
Biden has promised to roll out a large infrastructure package that is expected to incorporate ideas to boost the nation’s transportation and clean energy sectors now that Congress has passed his Covid relief bill.
“It not only creates jobs, but it makes us a hell of a lot more competitive around the world if we have the best infrastructure in the world,” he said after a March 4 meeting with Democratic lawmakers on the infrastructure topic at the White House.
Transportation is expected to be a big part of -- but not all of -- the likely infrastructure plan and mileage fees are being raised as a way to pay for some or all of that in a way that accommodates the rise of electric vehicles that Biden also hopes to see.
A vehicle-miles-traveled fee has been studied in the nation’s capital for years though previous versions have encountered resistance about forcing drivers to place transponders in their cars to keep track of mileage. But states that have experimented with pilot programs have found ways around that by letting motorists report odometer readings electronically or in-person, using plug-in devices or recording mileage with a smartphone app.
With the Biden administration preparing to begin a push for an infrastructure package that is expected to dwarf the just-passed $1.9 trillion Covid-relief bill in size, transportation advocates in Washington are more hopefully than ever that the idea’s time has come.
“People are talking about it more than have in the past, which is a good thing,” Jim Tymon, executive director of the American Association of State Highway and Transportation Officials, said in an interview.
“The vehicle fleet is trending toward electrification and the Biden administration is going prioritize this,” he said. “That’s going to force their hands a little bit because you’re not going to be able to collect the same amount of revenue as you do from gas and diesel vehicles.”
A vehicle-miles-traveled program also would help close the yawning gap in federal highway funding that is estimated to be as high as $16 billion this year. That’s because the Highway Trust Fund, which pays for roadway and transit systems, is financed primarily through the federal gas tax, currently 18.4 cent-per-gallon. That only brings in $34 billion per year while federal spending has topped $50 billion annually and has had to be supported by transfers from the general fund.
Last year, Highway Trust Fund receipts from the gas tax were down 9.4% over the previous fiscal year due to a reduction in driving because of the pandemic. The gas tax has not been raised since 1993, and there is little appetite in Washington for increasing it. The push for plug-in cars is an additional complicating factor because fully electric vehicle drivers do not pay any gas tax. Several carmakers have pledged to produce all-electric fleets by the end of the current decade.
“The President’s made a commitment that this administration will not raise taxes on people making less than $400,000 a year,” Buttigieg said during an appearance on Bloomberg Radio’s “Sound On” show. “And so that rules out approaches like the old fashioned gas tax.”
During Buttigieg’s Senate confirmation hearing in January, he was asked how the administration would pay for an infrastructure program and mentioned a per-mile fee as one option.
“If we are committed to the idea of user pays, part of how you might do that is vehicle miles traveled,” he said. “But that raises concerns about privacy and there remains some technological questions.”
Washington has been mostly spinning its wheels on infrastructure spending for half the past decade, due in part to a reluctance to raise gas taxes.
A five-year, $305 billion transportation funding law was set to expire in 2020 but was extended until next year. The House passed a five-year, $494 billion surface transportation bill in July 2020, but the measure was not been approved by the Senate.
Greg Regan, president of the AFL-CIO’s Transportation Trades Department, said there is “more political will” for the Biden administration’s push for a robust infrastructure bill and there’s growing interest in an alternative to the gas tax.
“It’s a user-fee model that encapsulates electric vehicles, so it’s perhaps more equitable than the gas tax,” he said. “The headwinds haven’t changed. There’s still privacy concerns, but it’s not like isn’t being done in various states around the country. There are models that work.”
Regan said any mileage fee program that’s included in Biden’s infrastructure bill will likely have to be phased in after another infusion of cash from other areas of the federal budget for the beleaguered Highway Trust Fund.
“You have to phase it in, maybe in three-to-five years after a one-time transfer,” he said. “The last time the gas tax was raised, it was part of a big budget bill. You’re not going to get a standalone vote on something like that.”
Representative Sam Graves, of Missouri, the top Republican on the House Transportation and Infrastructure Committee, said a mileage-fee could easily be substituted for the gas tax without using techniques that raise the thorny privacy issues that tanked prior versions of the proposal.
“It can be done right now with the technology that we have,” Graves said last month during an appearance at an American Association of State Highway and Transportation Officials conference.
Graves suggested that for gas- or diesel-powered vehicles, a per-mile tax can be assessed through a simple formula at the pump. “We take whatever you come with as the national average for miles-per-gallon, multiply that by whatever the VMT is going to come up to, let’s say a penny, and we just calculate it at the pump,” he said.
“It doesn’t take any new technology,” he said. “This isn’t about any GPS tracking devices or anything like that. This is just a formula at the pump very much like we’re doing now with the fuel tax.”
Graves suggested Friday that planned modernization of the U.S. Postal Service vehicle fleet could provide an opportunity to test a mileage fee program on a national scale because the some of new postal vehicles will be electric.
Adrian Moore, vice president of policy at Reason Foundation, a libertarian think tank, said a mileage fee would be a more equitable user fee than the gas tax because drivers of electric cars avoid paying anything. And those who can afford new, more fuel-efficient cars are paying less per mile than their counterparts who drive older cars.
The result, he said, is a system in which “those that can afford new technologies will be privileged to pay less than those who can’t afford it.”
The longest-running U.S. mileage tax program started in 2013 in Oregon, where drivers who join OReGO, as the program is called, are charged 1.8 cents per mile for trips that take place on the state’s roads. Participants are given the option of using a GPS device to record their miles or using a non-GPS option that tracks usage based on the mileage odometers of cars.
In return for participating, the drivers are offered a tax credit reimbursing them for the 36-cent-per-gallon Oregon gas tax that they pay on fill ups. Drivers in the program receive regular statements of their road charges based on the reported miles, which also show their fuel tax credits.
In Washington state, a newer pilot program allows drivers to choose between four methods of tracking mileage, including pre-paying for an estimated number of miles that will be driven annually, reporting mileage based on odometer readings either electronically or in-person, using plug-in devices that in some cases contain GPS systems or recording mileage with a smartphone app.
California, Delaware, Hawaii, Minnesota, and Missouri also have federally-funded mileage fee pilot programs.
Representative Pete DeFazio said legislation he’s supported in the past paid for some of the pilot programs.
“I continue to support this approach,” DeFazio, an Oregon Democrat who chairs the Transportation and Infrastructure Committee, said in a statement. “We need to learn from these tests, including about how revenue gets collected and how we address privacy concerns, before we take any additional steps at the federal level.
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