Mar 26, 2021 - Economy & Business

Unpacking the growing push to tax drivers by the mile instead of at the pump

Illustration of a mile marker sign with a dollar sign
Illustration: Eniola Odetunde/Axios

There's growing acceptance among federal lawmakers for a road user fee to fund highway repairs, but how it would work — and who would end up paying — are unclear.

Why it matters: The Highway Trust Fund, which pays for roads and transit systems, is going broke. The existing federal gas tax isn't enough to meet rising costs, and the budget gap will only grow wider as cleaner cars burn less fuel.

  • Electric cars don't even need gas, which is why finding an alternative to the current 18.4-cent per gallon fuel tax is inevitable.

The big picture: President Biden is getting set to unveil a $3 trillion economic package that will include spending on everything from highways, bridges and rail to broadband networks and electric vehicle charging stations.

  • Transportation Secretary Pete Buttigieg told lawmakers Thursday that the moment offers “the best chance in any of our lifetimes to make a generational investment in infrastructure” and that climate change must be addressed.

While infrastructure generally enjoys bipartisan support, lawmakers are divided over what should be included and how to pay for it.

  • Neither side seems interested in raising the gas tax at this point, even though electric vehicles still represent less than 3% of new cars sold.
  • Democrats suggest raising taxes on the wealthy, or hiking the corporate tax to 28% from today's 21%, but Republicans are firmly opposed.

One area of potential agreement — at least on highway funding — is a vehicle-miles-traveled (VMT) system that would charge drivers a penny or two for each mile logged behind the wheel.

  • The idea has been under consideration for years, and several states, including Oregon and Utah, are currently running pilots to test the technology and consumer acceptance.
  • Supporters say it's a way to ensure that electric vehicle owners — who currently pay no fuel taxes — chip in their fair share for road maintenance. (29 states have imposed alternative annual fees on EVs in the meantime.)
  • Buttigieg is open to a VMT. "We’re obviously going to have to come to more solutions if we’re going to preserve the user-paid principle," he told lawmakers Thursday.

Yes, but: There are technical and privacy challenges, and some environmentalists worry new fees would slow the adoption of EVs.

  • A VMT would do nothing to curb carbon dioxide emissions either, they note.
  • SUVs with the worst miles per gallon ratings would end up with a tax break, while fuel-sipping cars would pay more than they do today. The Washington Post has a cool interactive tool to visualize the potential impact.

How it works: Under a VMT system, drivers would report their mileage electronically, using a plug-in device in their cars or a smartphone app.

  • But forcing drivers to insert a transponder in their car raises worries about Big Brother tactics.
  • Commercial trucks already track their mileage, so VMT supporters say that's a natural place — along with ride-sharing fleets — to begin the new user fees. Not surprising: the American Trucking Associations objects.

The bottom line: Everyone agrees America's crumbling infrastructure needs fixing.

  • The American Society of Civil Engineers gave the U.S. a D+ on infrastructure, while an analysis of federal data by the American Road & Transportation Builders Association (ARTBA) found that more than one-third of U.S. bridges need major repair work or should be replaced.

What to watch: No matter what happens with Biden’s ambitious infrastructure plan, Congress has until Sept. 30 to reauthorize a surface transportation funding bill, which pays for road and transit projects in all 50 states.

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