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US CBO: Taxing mileage a ‘practical option’ for revenue enhancement

Public Policy

The Congressional Budget Office (CBO) this week released a report that said taxing people based on how many miles they drive is a possible option for raising new revenues and that these taxes could be used to offset the costs of highway maintenance at a time when federal funds are short.

The report discussed the proposal in great detail, including the development of technology that would allow total vehicle miles traveled (VMT) to be tracked, reported and taxed, as well as the pros and cons of mandating the installation of this technology in all vehicles.

“In the past, the efficiency costs of implementing a system of VMT charges — particularly the costs of users’ time for slowing and queuing at tollbooths — would clearly have outweighed the potential benefits from more efficient use of highway capacity,” CBO wrote. “Now, electronic metering and billing are making per-mile charges a practical option.”

The report was requested by Senate Budget Committee Chairman Kent Conrad (D-N.D.), who held a hearing on transportation funding in early March. In that hearing, Transportation Secretary Ray LaHood said the Obama administration is hoping to spend $556 billion over the next six years, much of which would go to federal transportation improvement projects.

Conrad said in response that federal funds are tight, and in asking for recommendations on how to raise that money, he noted the possibility of a VMT tax as a way to solve the problem of collecting less in taxes as people move to more fuel-efficient vehicles.

“Do we do gas tax?” Conrad asked. “Do we move to some kind of an assessment that is based on how many miles vehicles go, so that we capture revenue from those who are going to be using the roads who aren’t going to be paying any gas tax, or very little, with hybrids and electric cars?”

Conrad argued some recommendation should be made by his committee on these issues when the Senate considers a transportation spending bill later this year.

CBO’s report stressed it was making no recommendations but seemed to support a VMT tax as a more accurate way of having drivers pay for the costs of highway maintenance. The report said miles driven is a larger factor in highway repairs than fuel consumption and suggested that having drivers pay for the real costs of highways “would involve imposing a combination of fuel taxes and per-mile charges.”

But CBO’s assessment of “costs” was broader than just those costs associated with maintaining highway systems.

“Any given driver’s highway use also imposes costs on other users, on nearby nonusers, on the environment, and on the economy in the form of congestion, risk of accidents, noise, emissions of greenhouse gases and pollutants that affect local air quality, and dependence on foreign oil,” CBO said.

On how to implement the idea, CBO said it is unclear how much it would cost to “install metering equipment in all of the nation’s cars and trucks.”

“Having the devices installed as original equipment under a mandate to vehicle manufacturers would be relatively inexpensive but could lead to a long transition; requiring vehicles to be retrofitted with the devices could be faster but much more costly, and the equipment could be more susceptible to tampering than factory-installed equipment might be,” CBO said.

The report added that VMT taxes could be tracked and even collected at filling stations. “If VMT taxes were collected at the pump, each time fuel was purchased, information would be sent from a device in the vehicle to a device at the filling station,” it said.

CBO also suggested different VMT tax rates might be assessed to different vehicles because heavier vehicles do more road damage, and rates might change depending on whether miles are driven at peak use times or during less congested hours.

CBO did acknowledge that privacy concerns may be a hurdle to implementing a VMT tax because electronic tracking of miles driven might provide too much personal information to the government. However, CBO noted that some have proposed restricting the information that would be transmitted to the government.

the hill

4 Comments on "US CBO: Taxing mileage a ‘practical option’ for revenue enhancement"

  1. Anthony on Sat, 26th Mar 2011 7:36 am 

    Mark my words, if this happens…there will be revolts.

  2. Mike999 on Sat, 26th Mar 2011 11:35 am 

    We already have a Mileage tax: the GAS TAX.
    Raise the GAS TAX 5 cents a year, automatically.
    The US imports 70-75% of our oil use, making us the MOST Vulnerable country in the world to a gas shortage.

    Not to mention Global Warming, and the Crop Damage Farmers are experiencing from more extreme Droughts and Floods.

    I’ve never heard of a STUPIDer Idea then this.

    Add a $200 per car charge for equipment, a Bureaucracy, an annual fee and a Bureaucracy to collect it, OR a 5 cent increase in the Gas Tax!


  3. James on Sun, 27th Mar 2011 6:30 am 

    It doesn’t sound like the U.S. government is even trying to cut spending. With the gas tax, they should be able to maintain the roads, not build new ones. In another few years, it will be so expensive, no one will be able to use what roads we have let alone use the new ones. Also, this will make the price of food skyrocket, which maybe a good thing because it will encourage local food production.

  4. CXGZ61 on Sun, 27th Mar 2011 11:45 pm 

    More tax, more control, more spending. I feel like I am in the twilight zone as this once great country of ours continues to move away from all of governing principals that made it great. The liberal mindset is a charade. It fixes wealth at the top and concentrates power in the hands of a few decision makers that pick winners and losers.

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