By 2022, the Highway Trust Fund (HTF), the main funding source for the federal government’s investments in highway and transit infrastructure and primarily funded by the federal motor fuels tax, is set to dry up. In anticipation of this, Congress is looking at long-term solutions to fund our surface transportation systems. One of those proposed solutions on the table is a vehicle miles traveled (VMT) tax.
The Congressional Budget Office (CBO) recently released an analysis on the VMT tax with a focus on commercial trucks. The report, entitled Issues and Options for a Tax on Vehicle Miles Traveled by Commercial Trucks, examines the potential revenue generated from a nationwide VMT tax on commercial trucks. Estimates show that a VMT tax of 1 cent per mile in 2017 would have generated $2.6 billion in revenue if applied to all commercial trucks, or $1.6 billion if applied to combination trucks only (tractor-trailers).
Under the current gas tax system, HTF generated $41 billion in revenue but disbursed $54 billion for projects across the nation in 2017, relying on transfers from the Treasury’s general fund to stay afloat. A VMT is a viable revenue source, but the CBO points out a multitude of issues Congress would need to resolve before administering such a tax:
- Rate structure: How much tax is needed to administer to correct the HTF deficit? A 1 cent per mile tax could generate $2.6 billion in revenue, a step in the right direction— but far from the $13.5 billion deficit seen in 2013. A 7.5 cent per mile tax would generate $19 billion in revenue, which would cover the $14.6 billion in HTF taxes that truck owners pay each year, along with their share of the $13.5 billion deficit; however, such a high tax most likely would result in less commercial freight and more use of rail transit. Whether to impose a uniform tax or different taxes based on vehicle type or location of vehicle would also heed consideration.
- Tax base: What vehicles would be subject to the tax as well as what set of roads would be taxed? Taxing all commercial trucks would net a greater return (the aforementioned $2.6 billion from a one cent per mile tax), but pushback from voters could make taxing only combination trucks (trucks with one or more trailers) a more viable option (bringing in $1.6 billion from a one cent per mile tax). The report mentions all public roads, Interstates highways and other arterial roads, or Interstate highways only could be taxed.
- Implementation: What method of tracking should be used to properly assess taxable mileage? The report offers three solutions: periodic odometer reporting (zero federal cost for odometers, high cost for enforcement tracking), ID readers on road gantries or collection booths like toll roads (high federal cost for installing readers), or electronic logging devices installed in cars (mid-tier costs for both installation and enforcement). Each method demonstrates the biggest dilemma facing a federal VMT tax: costs. While the tax would generate significant revenue, installation and enforcement costs could negate a portion of the revenue.
Of the four states that issue a VMT tax, Kentucky is the only one that is set at a flat rate (2.9 cents per vehicle mile traveled) and is set only for large combination trucks weighing more than 60,000 pounds. New Mexico, New York, and Oregon all issue a sliding scale tax based on vehicle weight. All four states predominantly enforce taxable miles from periodic odometer readings.
ASCE’s 2017 Infrastructure Report Card gave America’s bridges, rail, road, and transit grades of “C+,” “D,” and “D-,“ respectively. These sub-par grades are a result of our inability to provide the needed revenue to support the HTF. Continued under-investment of the HTF will cause our transportation infrastructure to further degrade. As we look to improve our nation’s surface transportation infrastructure, we must urge Congress to increase the gas tax by 25 cents to ensure we have long-term stability. A VMT tax is just one recommendation to ensure we remain competitive in the changing, 21st century global marketplace, but it is not the only solution. ASCE recommends that adequate funding for planning, designing, operating, maintaining, and improving the nation’s transportation system be provided by a comprehensive program with sustainable dedicated revenue sources at the federal, state, regional, and local levels.