Seven years ago I blogged about California’s new legislation to study a vehical miles traveled (VMT) tax as an alternative to the gasoline excise tax (10/4/14 post). Oregon had already been studying one.
In July 2015, a Senate Finance Committee working group – working on tax reform, discussed a VMT in its report on infrastructure in reference to issues with the gasoline excise tax and Highway Trust Fund. Basically, with people driving more fuel efficient cars including electric cars that don’t use any gasoline, not enough money goes to the HTF. And the gasoline excise tax has been 18.4 cents per mile since 1993! It is not adjusted for inflation and hasn’t been increased. The HTF has needed General Fund contributions since at least 2008 (the 2015 Senate report notes that over $65 billion had been transferred since 2008).
The 2015 report suggests a VMT as long-term option to fund the HTF. The working group noted that a VMT “has the potential to imprve the efficiency of highway financing because the tax can be calibrated closely to the costs that vehicles impose in terms of rod damage an dcongestion. Additionally, the tax coud be calculated based on time of day, congestion, type of road, type of vehicle, etc.”
The Senate working group noted that it “take up to a decade to fully implement” a VMT. BUT, unfortunately, nothing was started!
I had this topic on my calendar for a while because I was going to note that the Build Back Better plan doesn’t address the problems with the gasoline excise tax or suggest implementing a VMT. A lot of study has already been done on a VMT by Oregon and California, academics and think tanks. We should move on it.
But new news – H.R. 3684, INVEST in America Act, the infrastructure bill passed by the Senate on 8/10/21 by a vote of 69-30, includes at Sec. 1630, a requirement that the GAO do a study on “per-mile user fee equity” within 2 years of enactment. This study would look at various issues of a per-mile user fee system including its effect on low-income individauls and the ability to access jobs and services.
Given use of the term “fee” and no reference to the gasoline excise tax, sounds like if such a fee were implemented, it would be in addition to the gasoline excise tax.
So, it is good that the concept of a VMT at the federal level is not completely forgotten, but more is needed to replace the out-dated gasoline excise tax with something more appropriate for funding the HTF. Let’s see if something more comprehensive gets into the infrastructure bill. I think we need action rather than just more study.
What do you think? Annette Nellen
Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.
Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.
Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.
Prior to joining SJSU, Annette was with Ernst & Young and the IRS.
1 comment on “Vehicle Miles Traveled Tax Study Versus Action”
Speaking as someone working closely with these kinds of pilot programs across the U.S., I must agree that action is preferred–especially considering the breadth of research that has already been completed. Our company alone has been involved in over a dozen projects and are confident a road usage charge (RUC) system is a viable gas tax alternative. It’s quick to implement, easy to scale, and flexible enough to allow for variable rates, congestion pricing, etc.
However, for many people, such a big change is a horse pill to swallow. The general public needs time to adjust and be educated to understand the necessity and workings of such a radical change in user fees. Shifting from gas- to mile-measured fees is anxiety-provoking for many…even with completely private and tech-free mileage reporting options! Objections to RUC range from privacy invasion to fears of double-taxation to EV and rural driver punishment (all of which are unfounded).
This is where a nationwide pilot would greatly benefit everyone involved. It bridges the gap between two very different forms of transportation funding by inviting volunteers (usually enthusiastic early adopters and influencers), collecting feedback on challenges specific to each region (and the challenges really do vary from state to state), and steadily educating the skeptics. Funding changes are needed. So is the acceptance and participation of every driver. If we’re going to do it, let’s do it right.
Thank you for writing about such an important topic. It would be my pleasure to be a resource for any additional information you may need to write more in the future.
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