News: CJ Exclusives

Feds Push for National Vehicle Mileage-Based Tax

Fuel taxes not providing enough revenue for highways, backers say

As Congress crafts a six-year surface transportation bill replacing legislation that will expire later this year, transportation trade groups report that the Obama administration is floating the idea of new driving charges — a national vehicle mileage-based tax and tolls on some interstate highways and other federal roads.

The VMT idea first was brought up in February 2009 when Congress was working on a reauthorization of the transportation bill. At that time, U.S. Transportation Secretary Ray LaHood mentioned a VMT as an alternative way to fund transportation projects. LaHood said there isn’t enough fuel-tax revenue coming into the federal Highway Trust Fund to meet the nation’s surface transportation and infrastructure needs. Nor do fuel taxes generate enough money to keep the fund solvent as vehicles become more fuel-efficient and use less gas.

Such a proposal might require motorists to install onboard devices tracking how much they drive so that a tax could be calculated accurately, raising privacy concerns. Drivers in rural areas and remote suburbs, who travel long distances to their jobs, would face much higher costs under a tax-by-the-mile program, as would drivers of electric or hybrid vehicles who would pay the same as drivers of less fuel-efficient vehicles.

Critics of VMT also note that boosting the cost of driving might push more commuters into public transit — a goal of the administration and advocates of a “smart growth” urban planning agenda.

An undated draft of a bill titled the “Transportation Opportunities Act” (PDF download) has circulated in the U.S. Department of Transportation and the Office of Management and Budget. The draft was obtained in early May by Transportation Weekly and reported in The Hill newspaper.

The Hill said DOT officials would not confirm the draft is their work. And in an email to CJ, DOT spokeswoman Olivia Alair said “The Obama administration does not support a vehicle mileage tax, or VMT.” [See editor’s note.]

The bill would create a Surface Transportation Revenue Alternatives Office to authorize, within one year of the bill’s enactment, a study framework for a mileage-based user fee system, including vehicles using fuels that are not taxable under the 1986 IRS code. The bill also provides for field trials to test a VMT system and the creation of a PR campaign to sell the public on the need for alternative funding sources for surface transportation programs.

Section 2217 of the draft bill would authorize states to impose tolls on highways, bridges, or tunnels, including interstate highways, in urbanized areas with populations greater than 1 million people. However, toll authority could include any area deemed to have high levels of congestion.

The draft proposes the creation of a new broader Transportation Trust Fund to replace the current Highway Trust Fund. A number of new accounts would be established, including the Mass Transit Account and a Passenger Rail Account. One funding source mentioned is a “new energy tax,” though it was not defined. The dollar amounts authorized in the draft bill correspond to those in DOT’s fiscal year 2012 budget request.

VMT critics say the government doesn’t need alternatives financing sources if they would use the funds they now collect for highway projects rather than unrelated programs.

“It’s unnecessary to impose a VMT if officials would stop diverting funds to non-highway projects, like bike paths, pedestrian walkways, and high-speed rail,” said Curtis Dubay, senior tax policy analyst for The Heritage Foundation. “Only 62 cents of every dollar going to the Highway Trust Fund is used for road projects,” Dubay said.

U.S. Rep. Howard Coble, R-6th District, serves on the House Transportation and Infrastructure Committee. Coble’s press secretary, Ed McDonald, told Carolina Journal that Coble’s office does not yet have a draft of the surface transportation bill.

CJ’s calls to the U.S. Senate Environment and Public Works Committee and the Committee on Commerce, Science, and Transportation to learn more about proposed legislation were unsuccessful.

Cost of a VMT

While some worry about privacy concerns raised by having devices in automobiles to track and report driver movements, others point to the high cost of implementing such a program and the disproportionate economic hardship on low-income and rural drivers.

The Minnesota Department of Transportation conducted a mileage-based public opinion study in August 2007. Participants expressed concern that such a system would be like “Big Brother,” enabling the government to track and watch drivers.

In 2008, Oregon, Minnesota, North Carolina, and three other states were part of a two-year, federally funded study conducted by the University of Iowa Public Policy Center to pilot a VMT system. One goal was to test how the public would respond to the new mileage-based road user charge system. Participants were paid $895 to be in the study. The Road User Study website says the results will be presented at a congressional hearing sometime this year.

A November 2010 report from the I-95 Corridor Coalition examining VMT issues said the federal government would experience major challenges and costs in setting up VMT-based charges. The federal government either would have to establish a new enrollment and administrative structure to register vehicle owners and maintain customer records or rely on state efforts to do so.

The new structure would have to account for changes in vehicle ownership, methods of enrollment, number of accounts, and whether enrollment would rely on state vehicle registration files. The study group estimates that additional vehicle registration costs — above what states now charge drivers — would range between $15 and $24 per vehicle.

The I-95 coalition based its mileage cost estimates on the Dutch system, which ranges from $3.73 to $20.36 per vehicle per year, or $0.42 to $1.87 per 1,000 vehicle miles traveled.

Nor is it clear whether these alternative financing programs would replace the gas tax or be imposed alongside it, though some studies have mentioned these alternatives as an addition to existing fuel taxes.

Dubay told CJ the VMT and interstate tolling could discourage driving and achieve other administration policy goals, such as boosting public transit. Language in the draft bill referring to “livable communities” and the proposed Federal Surface Transportation Policy and Planning Act of 2011 make it clear that the administration wants to increase overall use of public transportation and reduce transportation-related carbon dioxide levels and use alternative financing to advance those objectives.

Karen McMahan is a contributor to Carolina Journal.

Editor’s note: This story was updated to include a comment from the DOT.