The Vehicle Miles Traveled Tax Would be a Tax from Hell

Source: https://www.flickr.com/photos/skippy/4172912/

Politicians are facing a problem. As they have spent the better part of two decades now urging (and subsidizing) Americans to purchase more fuel-efficient or electric vehicles, gas tax revenues have fallen. With electric vehicles not even being charged for road usage and a slew of lobbyists pushing for a massive infrastructure package, politicians now face a dilemma: there’s not enough money. Indexing the gas tax to inflation is a popular proposal among insiders, but gas tax increases are wildly unpopular; polls everywhere from Michigan to Washington have shown gas tax hikes to be unpopular, and even voters in the liberal bastion of Massachusetts repealed their state’s attempt at gas tax indexing.

With the gas tax seemingly dead, some politicians have moved on and are now dead set on passing what is known as a Vehicle Miles Traveled tax, or VMT. This tax is wildly popular among bureaucrats and lobbyists, but how would it work in reality?

How does a VMT work?

In theory, the VMT would be fairly simple. Advocates are often careful to refer to the VMT as a “fee”, not a tax, but in reality it’s a tax like any other. The miles you drive would be tracked, and you would pay a (somewhat) flat tax per mile depending on the type of vehicle you own; I say “somewhat” flat here there are already plans to implement “congestion charging” fees for the crime of driving at the same time as other people, or of driving somewhere where a lot of people live. How these miles are tracked seems to vary. Some have suggested odometer reporting, although at the state level this would tax people for miles driven in other states, robbing those states of tax revenue. Others have suggested requiring a transponder in your vehicle which will continually track every mile you drive; the latter proposal is where the problems arise. Washington state has also experimented with pre-paying for the expected number of miles driven, which seems to be an even less ideal solution. In return for this new tax, a total repeal of the gas tax is often — but not always — suggested. However, the government’s history on actually replacing taxes rather than adding them tends to be fairly poor.

One other thing worth noting: the gas tax is very cheap to collect, while a VMT would inherently have administrative fees associated with it. The Federal Highway Administration suggested this could cost anywhere from 5% to 18% of revenue that a VMT would bring in. So even if a VMT did bring in more money, a large chunk of that benefit would go to enforcement and administering hundreds of millions of individual accounts. This means the actual benefit to actual highway funds might not be as large as expected. A transponder tracking scheme would cost more than a simple odometer reading, but enforcement on the latter could potentially be a challenge.

There are also alternative ideas; Republican Representative Sam Graves of Missouri, the ranking member of the House Transportation and Infrastructure Committee and a longtime supporter of the VMT, has suggested a tracking system won’t be needed for gas and diesel-powered vehicles. Instead, he argues that a formula could be calculated at the pump, utilizing the average miles per gallon nationwide. However, this still doesn’t encompass electric or hybrid vehicles, a market that is executed to only grow in the coming decades.

Privacy problems

People are already suspicious of both tracking from tech companies and mass government surveillance. If a tracking solution was ultimately decided on as the way to impose a VMT, your entire driving patterns would be fully tracked. This tracking system could be used to enforce traffic laws – imagine one massive red light camera covering the entire United States, but also tracking everything from speeding to illegal turns or improper parking. This could potentially also be funneled to insurance companies, some of which already track driving for these who want it, allowing them to raise or lower your premiums. And hypothetically, if another pandemic lockdown were to occur, a VMT tracker could be used to enforce it.

That might all sound a bit out there, but the technology is already out there. EZ Pass toll road transponders have been used in divorce courts to identify cheaters and can even suspend the passes of drivers who go over the speed limit. Even more concerning is Washington state. During the state’s VMT pilot program, Mariya Frost of the Washington Policy Center enrolled to test it. Through a smartphone app, her driving patterns were tracked and scored — including every time she went over the speed limit, and exactly how long. This information was supposedly for her use only, but city and county governments would kill to get their hands on such a lucrative source of revenue. No longer would small municipalities have to devote police officers to speed traps; instead, they could just use data directly from the VMT system. There’s no reason this technology couldn’t, and wouldn’t, be extended to cover other routine traffic violations as well.

Nobody wants this

Beyond the practical and technical hurdles, there’s one other big problem with the VMT: it doesn’t appeal to anyone. To liberals and progressive voters, the VMT is a regressive tax that also punishes the adoption of electric vehicles. To conservatives, it is an unacceptable burden on the middle class and on Americans who don’t live in dense, urban areas. To civil libertarians, it is an egregious violation of privacy that could lead to even more mass government surveillance. Deficit-hawk centrists might be turned away by its costly administrative fees.

The Vehicle Miles Traveled Tax concept seems designed to alienate virtually every side of the political spectrum. To some, that might be a positive; after all, compromise often requires all sides to face things they don’t like. After an early gaffe from Transportation Secretary Pete Buttigieg, President Biden has outright rejected including either a VMT or gas tax hike in any infrastructure bill, noting his pledge not to raise taxes on those making less than $400,000 a year. But that hasn’t stopped Congress from pushing for it, and it won’t stop the states from testing the waters either.

Ultimately, only one thing can stop a Vehicle Miles Traveled Tax: the voters.