Taxing vehicle mileage more complex than it may seem

By David Tanner, Land Line associate editor | Monday, December 17, 2012

Replacing the fuel tax with a tax based on vehicle miles traveled may not seem like a complicated thing to do, but highway users have reasons to believe it could open Pandora’s Box in terms of privacy and the overall relevancy of a federal infrastructure system.

Late last week, U.S. Rep. Earl Blumenauer, D-OR, introduced a bill, HR 6662, calling for a pilot program to study a mileage-based user fee in each state. While Blumenauer’s bill is just a pilot program, it could validate plans for a nationwide VMT tax in the future.

Truckers have raised concerns about privacy in the past in terms of how a mileage-based tax would be levied, most likely through GPS or some other mileage tracking system. But the largest obstacle remains the scale involved with implementing a nationwide network of tracking locations most likely at fueling stations, where motorists would see and pay their individual tax bills.

“Outside of the privacy issue, outside of the technical feasibility, is a problem of scale,” said OOIDA Director of Legislative Affairs Ryan Bowley. “It’s an enormously complex issue. Any real discussion of this needs to be a process.”

Since 2006, two federally appointed panels have mentioned a vehicle miles traveled tax, or VMT, as a way to keep money going into the Highway Trust Fund as vehicles get more fuel efficient.

“What we’ve got to be worrying about right now is stabilizing the Highway Trust Fund. That’s the near- and mid-term challenge for transportation right now,” said Bowley. “We’ve got a $105 billion shortfall over the next 10 years. Realistically, are we going to switch to a VMT for all vehicles in the next 10 years? I would say that would likely be too short of a timeframe, because it really goes back to that issue of scale.”

Another issue is how states will react, or not react, to a federal VMT system.

“By shifting to a VMT-based funding system, the folks who argue for devolution of the federal system are going to have a big new argument out there,” Bowley said. “Each state is also going to have to make decisions, as well. Are the states going to continue the fuel tax?”

“Congress needs to be involved with this, and they need to reach out and get the feelings of their constituents about it – truckers, commuters, all of them. If you go to a system like this, you’re talking about some form of taxation on every single vehicle out there. That’s a big change from the system now where we all pay the fuel tax, but only a small number of folks actually pay the IRS.”

Copyright © OOIDA

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