Another Tax Coming Our Way? Introducing the Vehicle Mileage Tax

Although the concept has been around for a couple of decades, I suspect that not many people are familiar with a Vehicle Mileage Tax or VMT. After reading an article on this topic in The Epoch Times, I decided to look into it a little more.

Here’s the article I read:

Senate Infrastructure Bill Gives Feds Go-Ahead to Test Taxing Every Mile Americans Drive

Why It’s Needed: As vehicles have become more fuel-efficient, fewer gas taxes are collected. Gas taxes go into the Highway Trust Fund (HTF) and are used to build roads, highways, bridges, as well as large-city light rail and bus systems. 

Also, electric vehicles “do not contribute to the state highway funds or the federal highway funds.” Thus these vehicles create wear and tear on the roads but do not contribute as much as gas-powered vehicles to the HTF. Currently, a “dozen states collect annual fees on EVs — ranging from $50 to $300.”

A federal gas tax of $.184 per gallon “only brings in $34 billion per year while federal spending has topped $50 billion annually.” So there’s a shortfall every year. 

According to The Epoch Times, “Congress has had to appropriate nearly $150 billion from general revenue in the past eight years to supplement the HTF’s declining gas tax revenues. Eighty percent of the gas-tax revenue goes to highways, with the remaining 20 percent is devoted to mass transit.”

Thirty-six states have raised their own gas taxes to try to keep up while the Congressional Budget Office estimates that the HTF will run out of money at the end of this year (2021).

State VMTs Already in Existence

Several states are piloting projects to implement their own VMTs:

  • Nevada
  • Oregon (1.5 cents for every mile driven)
  • Utah
  • Virginia
  • Washington
  • Pennsylvania

How could a VMT be administered? “A flat fee per mile based on vehicle weight measured by the odometer would be the simplest version of a VMT tax to administer and avoids most privacy issues. Odometer readings could be done at yearly inspections or by installing an on-board-unit (OBU) that electronically transmits VMT to a central computer.”

I can see drawbacks to both systems. An annual payment would hit families and individuals with a potentially huge bill at registration renewal time, especially families with a few or several children or a person who uses their car for their business. An OBU potentially brings up privacy issues. Will this OBU transmit a person’s travel destinations as well as their mileage? This is one of the challenges implicit in a system that installs OBUs into millions of cars. 

I have an OBU installed in my truck. I was reluctant to give up my privacy in this way but it saves me $75 a month on car insurance to do so. This device tracks every move and, in fact, knows when I brake in a way that Allstate considers is too abrupt. I can go onto the Allstate website and see how many times I pulled out of fast-moving traffic and into a short left turn lane, violating Allstate’s delicate sensibilities. 

Maybe Not the Best Plan?

The American Transportation Research Institute analyzed the cost of highway gas taxes and compared it to the cost of collecting the VMT and how much remained after these costs to go to the HTF. 

Based on this analysis (I’m sure there are others) we may actually net for more with the federal fuel tax than we do with the VMT. 

According to one report, a VMT might not replace the existing gas tax, but rather supplement it. If true, this means just one more tax for Americans. 

Are We Clipping Americans’ Wings? 

Who stands to struggle with the impact of a VMT? Here’s just a few that come to mind:

  • Families with multiple children who need to be driven to school or events
  • Those who use their vehicles for their own businesses
  • Any small business with a fleet
  • Parents who make significant sacrifices to drive their children to gymnastic training, swim meets and such in pursuit of a lofty goal
  • Those whose medical needs require long trips to specialists
  • Families who decide to introduce their children to our national parks or other natural wonders
  • Those who have no choice but to commute from the suburbs (where they can give their children room to grow up) to urban centers
  • Anyone who’s making a living driving Uber or Lyft or who works part-time in a rideshare operation to make ends meet
  • Rural residents who have no choice but to drive long distances for vital services or supplies

To the degree that there is gross misuse of federal funds, we are penalizing our citizens and our small businesses for their mobility. After COVID stay-at-home mandates, I am suspicious of any action that tries to limit people’s movements. 

California’s High Speed Rail

In considering possible unfairnesses implicit in this tax, I thought about California’s High Speed Rail system, begun more than a decade ago. It occurred to me that this could be an example of the kind of waste we would need to do away with if we want to avoid something like a VMT. 

In 2008, voters in the state authorized $10 billion for high speed rail from San Francisco to Los Angeles. The 2006 estimate of the entire cost of this project was $45 billion. 

Then $3.3 billion was committed to this project by Obama via the American Recovery and Reinvestment Act of 2009 (ARRA).

As of December 2020, the cost for a scaled-back system had “tripled to $75-80 billion, and the available funds are being spent solely on a 119-mile initial segment from Bakersfield to Merced in the middle of the state. There is no current plan or funding to build the rest of the planned 520-mile system.”

The estimated cost as of February 2021 is $100 billion according to Railway Age. 

Funding for this project was rescinded by the Trump Administration but was restored in June 2021 to the tune of nearly $1 billion. The Trump Administration had also sought the return of $2.5 billion of the earlier ARRA funds as the project “repeatedly failed to comply with the terms of the FY10 agreement and has failed to make reasonable progress on the project.”

This is just one project that was funded by billions in federal funds. And, of course, the project has been sucking funds out of the California budget for 14 years. 

It’s unfortunate and even tragic that Americans, many of whom live paycheck to paycheck, have to foot the bill for federal and local waste of tax funds. And then suffer from the imposition of even more taxes.

UPDATE: I just noticed that in March 2021, Buttigieg reported that the VMT would NOT be part of the huge Infrastructure Bill that was upcoming. But of course it is, at least in pilot form.

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