By Jim Baxter, NMA President
A federally appointed commission just released a report spelling out the demise of fuel taxes as a means to fund transportation projects. To replace the fuel tax they recommend that all vehicles be equipped with monitoring devices so taxes can be applied on a per mile traveled basis.
The commission was also adamant in its desire to see tolling systems expanded to existing streets, roads, and highways across the country, preferably under corporate control. The news stories that publicized these recommendations failed to mention that this commission was stacked with participants who have promoted or otherwise have a vested interest in monitoring, taxing, and tolling travel on the nation’s highways.
Setting aside the biases, conflicts of interest, and one sided analysis inherent in this commission’s proclamations, it’s useful to review and evaluate the fundamental premise that lead to the establishment of this commission in the first place; fuel taxes are no longer an adequate or viable mechanism to fund transportation projects. And, by extension, fuel taxes should be replaced by a system that applies taxes based on vehicle miles traveled (VMT).
We have a long history of using fuel taxes to fund the building and maintaining of our transportation system. The current system is certainly sophisticated, but it is also simple in concept. Fuel consumption is considered a good indicator of use and the impact on roadway infrastructure. Miles traveled and weight based demands and wear and tear on our highways are reflected in fuel consumption. The fuel taxes are further adjusted to shift costs to those road users that have an exaggerated impact on our highways, for example large trucks.
The first fraudulent assumption is that the fuel tax is not and cannot meet our funding needs. The argument goes, “the public is resistant to increasing the fuel tax and therefore it is not a viable taxing mechanism.” Or “fuel use is declining and with it so are fuel taxes.”
The fuel tax was sufficient to build the Interstate system (and most of the remaining road system) and maintain it all these years, why is it no longer viable?
Second, with a perspective longer than six months it is obvious that fuel use is not declining and even if it was, fuel taxes can be increased to a level that builds and maintains the road system we need.
Could it be the public feels deceived because their governments took money from motorists that was supposed to be spent on highways and instead used it on non-transportation projects? Or, that highway funds were spent (wasted) on projects and programs that returned no real benefit to motorists? If these basic issues of political integrity are not addressed why should motorists expect better from a VMT system of taxation?
Nobody likes increased taxes, but finding a politician that ever lost his or her seat solely for supporting a higher fuel tax would be a challenging task, especially if the funds were devoted to publicly supported projects. The real issue is that the public won’t support increases in the fuel taxes if it believes the money will be squandered or spent on non-highway projects.
Fuel Taxes vs. VMT Taxes
A side by side comparison of fuel taxes versus VMT taxes is revealing.
Ease Of Collection
Fuel taxes are easily and conveniently collected and difficult to circumvent. VMT taxes will require the installation of monitoring devices in 250 million vehicles. An entirely new tax collection infrastructure will need to be invented and implemented. Opportunities to circumvent the VMT taxes appear endless.
Transparency To Taxpayers
Fuel taxes are clearly posted and understood by consumers. Everyone pays the same amount per unit of fuel. Most VMT tax systems envision multiple rates based on location, time of travel, and type of road. Rates would change in real time and be adjusted to discourage travel in certain areas or on certain roads at different times, perhaps by different classes of vehicles.
Fuel taxes can be applied to any fuel, including electricity, and easily collected through centralized systems already established for these purposes.
Trying to collect VMT taxes, after the fact, would be an unmitigated disaster. Setting up a centralized collection system at fueling locations, one that would sort out all the variables, would be a significant challenge. It would also require an additional system for reviewing and ruling on billing disputes. As the complexities increase the opportunities for circumvention also multiply.
Our fuel tax system is totally anonymous. It does not involve the monitoring of travel or the activities of any person or vehicle.
By its very nature a VMT taxation scheme would, at minimum, be capable of monitoring and recording the travel of any and all vehicles. It would further be capable of assigning fines and penalties for the violation of traffic laws. These issues alone would create an industry devoted to disabling and manipulating the devices installed to monitor VMT and related activities.
Because fuel taxes are sensitive to fuel usage they encourage the use of more fuel efficient vehicles, regardless of the fuel used.
VMT tax systems could be designed to charge different mileage rates for different vehicles. These rates could be adjusted for weight, vehicle type, type of use, and classification of owner. It may even be possible to automatically adjust the rates based on driver inputs; more speed, higher rates etc. A whole new bureaucracy could be created just to make and adjust these rates and then enforce their application, something the fuel tax does automatically and without political bias.
The fuel tax does not pick winners and losers or discriminate against different groups or classes of fuel users. The tax on a gallon of fuel is the same for every customer. All fuel users have the same stake in the taxes assigned motor fuels.
A VMT tax system could allow different tax rates for different groups and classes of users, lower rates for those groups with political power, higher rates for those less favored groups. The same kind of graduated “progressive” system that characterizes our federal income tax system could be applied to a VMT tax.
Given the opaque nature of the VMT tax and the variations of taxing rates it would become just about impossible for individuals to gauge their tax burden against that of others. Taxes could be continually and incrementally increased for different small subsets of users, thereby avoiding a major confrontation with the driving population at large. “Unpopular” vehicle groups such as motorcycles or expensive sports cars could even be targeted for higher fees when traveling certain routes or at certain times as determined by political interests.
It’s understandable that certain corporate and political entities, like those represented on the federal commission looking into funding mechanisms for our future transportation needs, would favor a system like taxing vehicle miles traveled.
Such a system would be opaque, subject to infinite manipulation, confusing to the general public, largely unaccountable, costly (and profitable) to implement, expansive of government control, and a source of never ending political tinkering. It would also expedite the shifting of government revenue generation to the driving public, a persistent political objective.
The people on the other end of this long “stick,” the motoring public, might have second thoughts on abandoning the simple, fair, effective, and equitable fuel tax as the means to pay for their streets, roads, and highways.