Vehicle mileage tax pilot is part of infrastructure deal
Thursday, August 12, 2021
The Senate finally cranked the engine on the $1.2 trillion infrastructure bill, but it's still got a ways to go before becoming law.
One good thing about that extended journey is that it should give us time to read the legislative road map, aka the officially titled the Infrastructure Investment and Jobs Act's 2,702 pages.
A bill that size offers a lot of detours. One that's getting some attention is the inclusion of a pilot program for a vehicle mileage tax, or VMT.
The possibility of a VMT was broached, then dismissed, in early infrastructure talks. Basically, it's a fee (or tax) based on how many miles a driver puts on a vehicle, usually counted for a full tax year.
This user fee approach has gained support for a couple of reasons.
More EVs, reduced revenue: First, the increased popularity of electric vehicles (EVs) has meant those drivers escape the long-standing (and stuck at 18.4 cents per mile) gasoline tax. It's been the standard federal source of revenue for the Highway Trust Fund, which is the source of money for our nation's roads and bridges.
The gas tax, however, has not kept up with either inflation or the growing number of alternative fuel vehicles on the continually eroding roadways.
Nearly 1.8 million EVs were registered in the United States in 2020, according to the International Energy Agency (IEA). That's a phenomenal jump from 2016, when fewer than 300,000 EVs were registered.
While more EVs elates environmentalists, it's a big bust for the U.S. Treasury. Various studies show that each electric auto costs the Highway Trust Fund between $85 to $100 in gas taxes. That’s a federal revenue shortfall of $153 million to $180 million per year.
And the dollar loss could get larger if President Joe Biden meets his goal of dramatically expanding the number of U.S. electric autos on the road, including those in fleets used by federal agencies.
VMT proponents say EV drivers should pay their part in building and maintaining the roads they use alongside vehicles that run on fossil fuels. The argument also arose back when hybrid vehicles were all the rage.
Some states have opted to add fees to non-gas vehicles to make up some for their own highway funding losses, but there's not been a push at the federal level until now.
Changing commuting trends: The COVID-19 pandemic prompted working from home (WFH) trend also is adding a bit to the VMT push.
The move to home offices (or kitchen tables) was necessitate by coronavirus lockdown procedures at the height of the pandemic last year. Now it appears to be more than a passing fancy.
Even before the Delta variant stalled the reopening of offices, many companies were creating hybrid work situations where employees could continue to do their jobs from home at least some of the time.
More workers staying home means less commuting. That leads to less gas tax collection.
This is just a test: If you're freaking out about possibly having to pay a mileage tax, don't.
The infrastructure bill's proposal is not a federal tax heading to the Internal Revenue Code. It's authorization for exploratory programs to see how and how well any taxes on the miles that vehicles travel would work.
Specifically, Sec. 13001 of Title III — Research, Technology, and Education, of the bill, instructs the Secretary of Transportation to "establish a program to test the feasibility of a road usage fee and other user-based alternative revenue mechanisms…to help maintain the long-term solvency of the Highway Trust Fund, through pilot projects at the State, local, and regional level."
To do so, the bill provides $125 million over five years.
$75 million would go as grants to regional, state, and local transportation agencies in $15 million a year increments from 2022 through 2026 to set up pilot programs. These pilots would explore "the feasibility of a road usage fee and other user-based alternative revenue mechanisms."
At the national level, another $50 million, spent at $10 a year over that same five-year time frame (2022-26), is designated to a federal national VMT pilot.
At this level, Transportation Secretary Pete Buttigieg and Treasury Secretary Janet Yellen are tasked with establishing a pilot program that could help restore and maintain the long-term solvency of the Highway Trust Fund, which now relies on the gas tax, and also improve and maintain the United States' highway system.
Devil in the driving details: Obviously, there are a lot of details to be hashed out at all governmental levels over the coming five years. Insert your stalled at the side of the road bureaucracy comment here.
Uncle Sam needs to get state et al buy-in for necessary VMT tax pilot participation, which it wants to come from all 50 states and the District of Columbia and Puerto Rico. Some states, notably Oregon, have already looked into VMTs.
And depending on what the pilots show, Uncle Sam will decide whether a national VMT is the way to go.
Privacy questions paramount: The pilots will involve volunteers driving both passenger and commercial vehicles. Their miles will be tracked using GPS and data apps.
That immediately raises the perennial privacy question. Will the pilot operators know where the drivers go? Or just how much they drove? If it's a mileage count only, how will the distance-not-destination restriction be guaranteed?
Then there are the administrative issues. Just what kind of tracking device will be used? Will it simply be plugged into your auto via existing outlets found in newer cars? Or will it have to be installed internally?
The bill gives Transportation officials latitude here. It calls for on-board diagnostics (OBD) or original equipment manufacturer (OEM) collected telematic data, as well as information from insurance companies, a smartphone app, or "any other method" considered appropriate.
Um, OK. But that throws even more groups into the "who's got my data?" mix. And that circles back to, and increases, privacy concerns.
How will the pilot program operators ensure that any and all involved in the mileage info collection will keep it safe? Also, will these other parties be able to use the volunteer VMT participants' data for other purposes, such as marketing products?
Mapping out fairness: More directly, can a VMT really be fair to all drivers? Those traveling more urbanized areas tend to take shorter trips. Folks in more remote, rural locales put a lot of miles on their vehicles just to accomplish necessary tasks, but often on less traveled roads.
What about rush hour? Should miles traveled when more drivers are on the road cost more than those driven at less congested times? The argument here is that it could encourage people to explore mass transit. But if that works, it would take more cars off the road, lowering revenue potential.
Then there's individual vs. commercial travel. Should the miles tabulated in larger, more infrastructure-damaging business big wheels count more than lighter weight personal autos? And would businesses who paid more in VMT add the cost to their end products? Or change shipping methods in a way that also would negatively impact consumers?
Would vehicle differences and varying VMT levels also extend to the wide range of personal vehicles, from mini and compact cars to sedans to multi-passenger SUVs?
Eventual law issues: The VMT pilots will have to deal with and, where appropriate and possible, differentiate among these many (many, many) variables.
If and when it comes to actually establishing a tax, lawmakers will have to figure out mileage equity issues. Good luck with that!
And that brings us to the most formidable VMT question. Would a miles traveled tax replace existing fossil fuel excise taxes or be implemented in addition to the current federal and state levies?
If it's the latter, lawmakers will have to deal with the general antipathy of just about every U.S. resident to new taxes, regardless of whether they own, lease or just ride in vehicles.
You also might find these items of interest:
- EV mileage tax floated as way to fund infrastructure bill
- $5,000 electric vehicle tax credit hike clears Senate panel
- Tax-deductible standard mileage rates drop again in 2021
The gas tax was originally intended to be a use tax, with the proceeds used to fund highway maintenance. I doubt all of the gas tax is actually used for highway maintenance today but that’s a different issue.
I find it a bit ironic that the same government that pushes lower gasoline consumption, through EVs and increased mileage standards, is suddenly scrambling to replace the lost revenue from lower consumption.
So, how about something like this:
Starting Jan 1 2023, the federal gas tax is repealed. The IRS publishes a chart that shows how much tax you’ll owe if you drive a certain type of vehicle a certain number of miles (commercial vehicles could be charged more, EVs less…or whatever they wanted to punish/reward). Then you file your beginning and ending odometer readings for all cars you own on your taxes, which calculates your tax/fee for the year.
Worried about fraud? Auto repair shops could be required to enter your car’s mileage into a system as a way to establish data points to minimize under reporting. A minimum fee could be assessed for people who drive very little, to make sure they pay their share.
No need to install a GPS device in a car/truck (so it can be tracked). No need to send/save location information (so it can be hacked or used against you in any way). No need to turn your smart phone into a government-accessible location beacon.
There are easier ways to implement a mileage tax than requiring a tracking device. Perhaps the desire, on the government’s part, to track everyone’s movements is just a bonus.
Posted by: Plat4lifeTN | Friday, August 13, 2021 at 07:00 AM