The new $1 trillion infrastructure package will include a vehicle mileage tax program.
Here’s what you need to know.
The U.S. Senate passed President Joe Biden’s infrastructure bill with bipartisan support from 19 Republicans, including Senate Minority Leader Mitch McConnell (R-KY). Buried in the 2,700 page infrastructure package is a pilot program for a vehicle mileage tax. Here’s how it works and what it could mean for your wallet:
What is a vehicle mileage tax?
A vehicle mileage tax, or vehicle miles traveled fee, would charge motorists a fee based on how many miles they drive. Simply put, if you drive a vehicle, you would pay money to the government for every mile you drive. The time period can vary, but is typically a vehicle miles travel fee is measured in a one year period. A vehicle mileage traveled fee can be used to raise revenue for transportation and infrastructure projects.
How big is the vehicle miles traveled tax?
The infrastructure bill includes $125 million to fund pilot programs to test a national vehicle miles traveled fee.
- National pilot program: This includes $10 million each year from 2022 to 2026 for a national vehicles miles traveled fee pilot program.
- State and local pilot program: This includes $75 million provided from the federal government to regional, state and local transportation agencies. The breakdown is $15 million provided each year from 2022 to 2026.
Why does the infrastructure package include a vehicle miles traveled fee?
According to the infrastructure package, the goal of the vehicle miles travel fee is “to test the feasibility of a road usage fee.” Another goal, according to the infrastructure bill, is “to conduct public education and outreach to increase public awareness regarding the need for user-based alternative revenue mechanisms for surface transportation programs.”
When do you have to start paying a vehicle miles traveled fee?
This is only a pilot program for a vehicle miles traveled fee. Therefore, following the completion of a pilot program, the Biden administration may or may not implement a vehicle miles traveled fee. For the pilot programs, there will be volunteers from all 50 states, including both passenger and commercial vehicles. The drivers would have their miles tracked with GPS and data apps, for example, that would track their miles driven for a certain time period.
Will a vehicles miles tax replace the gasoline tax?
It depends. A vehicle miles tax could replace a gasoline tax, or it could be implemented in addition to a gasoline tax.
Is a vehicle miles driven fee a good idea?
There are pros and cons of a vehicle miles driven fee:
Vehicle miles driven: advantages
Suppporters say that the advantages of a vehicle miles driven fee include:
- A vehicle miles driven fee could help raise revenue for essential transportation and infrastructure projects;
- From a fairness perspective, both passenger and commercial vehicles would pay the vehicle miles tax; and
- If a vehicle miles tax replaces a gasoline tax, then drivers would be taxed based on how much they drive, rather than pay at the pump.
Vehicle miles driven: disadvantages
Opponents say that the disadvantages of a vehicle miles driven fee include:
- Privacy concerns, namely that the government could track citizens’ movements, including where and when they drive;
- Administratively difficult, since every driver in the U.S. would need a device installed in their vehicle to track how many miles they drive; and
- Disparate impact, as rural drivers tend to drive more, on average, and could therefore pay more than their urban and suburban counterparts.
There are other permutations and combinations to a potential vehicle miles driven fee. For example, there could be different fees for urban versus rural drivers, or commercial versus passenger vehicles. There could be other adjustments for vehicle weight or type of road as well as different fees during rush hour and non-rush hour times, for example.