Congress is looking for ways to fund President Biden’s infrastructure program. The current estimate is a $3 trillion package, including a huge wish list of which infrastructure would be a major part. At the top of the list is a truck mileage tax that Democrats have been eyeing since 2017. The American Trucking Association is opposed to the idea and called truck-only fees “discriminatory.” The trucking industry currently pays half the receipts into the Highway Trust Fund despite representing a small percentage of the vehicles on roads.
House Speaker Nancy Pelosi said that the infrastructure package should be “fiscally sound” and that the House was “examining tax credits, the tax code, the appropriations process and bonding authority among other ways to pay for new spending…” The Senate Finance Committee is also working on an international tax plan and a capital gains tax plan, but it is unclear whether those would fund infrastructure. The Chairman, Senator Ron Wyden, also noted interest in a carbon tax. Some Democrats are also eyeing deficit spending as a means of funding at least some of the plan.
Highway Trust Fund Running Out of Money
The main source of federal money for highways and transit is the gasoline tax, which has not been increased since 1993. Without additional revenue, the Highway Trust Fund will run out of money soon. According to the Congressional Budget Office, under current law, the Highway Trust Fund will be exhausted by 2022.
To keep it solvent, Congress has transferred roughly $144 billion to the Highway Trust Fund since 2008, according to the Congressional Research Service. Last year, Congress provided an additional $13.6 billion in a stopgap spending measure. Without an agreement on user fees or gas tax increases, lawmakers will probably continue authorizing general fund transfers. After agreeing to a year-long extension, Congress has a September deadline to reauthorize federal funds for highways, rail, and transit.
Another Option
A solution being considered is a vehicle-miles-traveled tax. Such proposed taxes have been considered and rejected in the past. However, due to increased investment in electric vehicles and President Joe Biden’s opposition to increasing the gasoline tax, a user-based fee is probably on the drawing board, which could also be used to pay for Biden’s infrastructure program.
Biden signed an executive order to replace the government’s fleet with electric vehicles. Although less than 2 percent of cars on U.S. roads today are electric, General Motors announced it will sell only zero-emission models by 2035, as did other companies. Because an increasing number of vehicles will not pay a gasoline tax under Biden’s scheme, a fairness issue could arise making a vehicle traveled tax more palatable. However, civil libertarians and others have expressed concerns in the past about such a program because of the inherent ability for government “tracking” of citizens’ personal travel such a system entails.
Some states have piloted user-based fees, but they are mostly in the experimental stage. Increased enforcement would be needed to make them national, which according to the Congressional Research Service could cost as much as 13 percent of the proceeds. Last year, the Washington State Transportation Commission received $5.5 million in federal funding to further study road usage charges, which the state has been assessing since 2012.
Earlier this year, California’s transportation department started a six-month demonstration on-road charge research. The state did its first pilot in 2017. But, rolling out a similar program in all 50 states is extremely complex because every state has a different financial structure and culture and there are privacy and technological concerns accompanying a vehicle mile traveled fee. Many Americans are skeptical of government programs, so for them to install devices in their vehicles to determine how far and perhaps where they have driven may be a difficult undertaking.
Issues with a Vehicle Miles Traveled Tax for Commercial Trucks
A key disadvantage of such a tax on trucks is its costs, which include initial setup costs and ongoing collection and enforcement costs. Current gasoline and diesel taxes are administered at low cost because they are collected from a small number of firms—roughly 1,300 fuel distribution terminals nationwide. A vehicle-miles-traveled tax would be collected from truck owners, which would be far more numerous, and thus would have a larger share of its gross revenues offset by implementation costs.
The tax would also have disadvantages for the trucking industry and consumers, increasing the price paid by Americans for shipped products if total taxes assessed on truckers (rather than substituting for existing taxes) were increased. It could also cause a shift of some freight shipments to rail losing market share for truckers. And, depending on how it is implemented (e.g. if it were to track drivers’ travel), it could also raise privacy issues.
Conclusion
Biden’s infrastructure program will be costly and finding a way to pay for it is keeping Congress busy with proposals. One such proposal—a vehicle miles traveled for commercial trucks—has been eyed by Congress since 2017. This proposal is not without its issues, including fairness, privacy concerns, cost of implementation, and the possibility of increased prices for American consumers.
