Two States Tax Some Drivers by the Mile. Many More Want to Give It a Try.

March 22, 2021

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by Ian Duncan (Washington Post) ... Widespread production of hydrogen-powered cars has not come to pass, but GM is eyeing an all-electric fleet by 2035 with the backing of the Biden administration. That has lawmakers in state capitals across the country and in Washington increasingly confronting the question that troubled Starr two decades ago.

Many have settled on an answer: charging drivers a penny or two for each mile behind the wheel. But while such a system would bring in tax dollars for roads, it also would present a new set of obstacles.

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Last year, the House passed a bill that would have created a federal pilot program to test a vehicle miles-traveled (VMT) tax. Under the legislation, the Treasury Department would impose a fee equal to the total amount collected in gas taxes, divided by the miles driven by passenger vehicles. The figure works out to about nine-tenths of a cent per mile, using data from 2019, the most recent available.

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States are leading the way, with Oregon and Utah launching the first programs and several others running pilots to test technology and build public support. The approach has bipartisan support in Washington, and Transportation Secretary Pete Buttigieg has signaled his openness.

But existing programs operate on a small scale, and a national system would mean tracking millions of vehicles. Supporters are pushing for the quick adoption of proposals to maintain funding of the nation’s crumbling infrastructure, while opponents, including environmental advocates, argue the shift is premature at a time when electric vehicles are a fraction of cars on the road. New fees also would slow their adoption, they say.

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The federal government has issued tens of millions of dollars in grants to back state projects exploring mileage-based tax programs. A bill that passed the House last year would have set up a national pilot program to tax vehicles by miles driven, and a Senate committee endorsed the idea. The Federal Highway Administration is beginning to explore how a pilot program might work, a spokeswoman said.

Sales of electric vehicles account for about 2 percent of annual new-car sales, with some forecasts projecting that number to grow rapidly.

The 18.4-cent federal gas tax was last raised in 1993. By 2008, Congress was shifting other money into the Highway Trust Fund to make up for shortfalls.

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The gas tax brought in about $26 billion and a tax on diesel an additional $10 billion in 2019, before the coronavirus pandemic pushed down the number of miles Americans drove. The Congressional Budget Office forecast in May that gas-tax revenue would decline about 1 percent each year as fuel economy improved and growth slowed in the number of miles driven. At the same time, it projected that transportation-related spending would increase in line with inflation, leaving the highway fund increasingly out of balance.

Rep. Sam Graves (R-Mo.), the top Republican on the House Transportation Committee, said the switch to a miles-driven tax could take place quickly to shore up funding for the nation’s infrastructure.

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The gas tax is cheap to collect, levied on a small number of wholesalers rather than customers, while taxing mileage would require tracking millions of drivers. The Federal Highway Administration pegged the collection costs at between 5 and 18 percent of the revenue the programs bring in.

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Surveys of drivers involved in pilot programs revealed questions of privacy and data security as top concerns. Many environmentalists also are opposed, saying that taxing gasoline also is also an effective tax on carbon dioxide emissions. Under a miles-driven system, the highest-emission vehicles stand to gain a tax break.

Max Baumhefner, a lawyer at the Natural Resources Defense Council, said there that is no reason to think the gas tax is fundamentally broken and that its weaknesses could be overcome by indexing it to measures of inflation and fuel efficiency.

“More than 30 states in the last decade have raised or reformed their gas taxes in one way or another,” Baumhefner said. “It’s not easy, but we do it all the time.”

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Environmentalists opposed a bill in Utah designed to encourage more drivers to sign up for the mileage-charge program. It would have raised flat fees on electric vehicles to the highest level in the nation and given drivers the option of avoiding them by opting to pay by the mile instead.

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But if lawmakers remain wedded to the idea of drivers paying for roads, Buttigieg said at a virtual meeting of state highway officials last month that means a mileage tax will be necessary.

“We know the gas tax is not a long-term solution anyway, given what’s happening with fuel economy and electrification, so I don’t think that’s where the energy is going to be in Washington,” he said.

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Bill Sullivan, executive vice president for advocacy at the American Trucking Associations, said if the idea continues to gather support at the federal level, he could see disagreements arising. Sullivan’s group supports boosting the gas tax before turning to a new way of raising money, but that idea has little traction in Congress. READ MORE

“Disappearing” Carbon Tax for Non-Renewable Fuels PDF (Advanced Biofuels USA)

All Those Electric Vehicles Pose a Problem for Building Roads: Gas taxes are the largest source of funding for highway construction and maintenance. As the Ford F-150 Lightning and other vehicles increasingly plug in, that revenue is shrinking. (Wired)

Collins calls EV users 'free riders' ahead of plan rollout (E&E News)

Excerpt from Wired: In the US, state and federal motor fuel taxes account for more than 40 percent of transportation funding—the largest revenue source. But the federal government hasn’t raised the gas tax since 1993, when it was fixed at 18.4 cents a gallon. Since 2008, Congress has allocated additional funds from elsewhere, but the situation is not sustainable: The Congressional Budget Office says that if the funding system doesn’t change by 2030 federal transportation funding will exceed its budget by $188 billion. At least 36 states have increased their fuel taxes since 2010 to bring in more money.

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But states that have experimented with and even implemented road user fees—a club that includes California, Hawaii, Minnesota, Oregon, Utah, and Virginia—have run into plenty of thorny questions. Collecting a gas tax is easy and cheap; drivers pay at the pump. But a per-mile charge would require gathering data and fees from millions of vehicles. Some states have experimented with radio transponders, others with devices that plug into vehicles and send data to transportation departments. Skeptics have raised concerns about tracking residents’ locations. And it’s not clear that such a system would raise more money than it costs.

Others question whether such a road user fee is fair. Rural drivers tend to drive farther just by virtue of where they live; should they always pay more? Critics also argue that the whole idea, like the gas tax itself, amounts to a regressive tax, one that will collect a larger share of low-income drivers’ earnings.

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Some environmentalists, meanwhile, say the whole conversation is backward. A gas tax isn’t all bad, they say, because it charges the drivers of the most polluting vehicles more money. One proposal from the Natural Resources Defense Council would tweak the gas tax, not get rid of it. First, it would index the tax to both inflation (as many states already do) and to nationwide fuel consumption, so that taxes would go up incrementally as fuel use goes down. Then the proposal would see electric vehicles pay an annual tax based on their miles-per-gallon equivalent—basically, how much energy they consume. “That way, the electric Hummer is going to be paying more than the electric Civic,” says Max Baumhefner, a senior attorney in NRDC’s climate and clean energy program. “And that’s the way it should be.” READ MORE