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States have already tested different approaches for how to replace gas taxes, but a federal pilot program mandated by the 2021 infrastructure law would be the biggest yet.
Federal agencies are running late in starting a congressionally mandated nationwide test that taxes motorists for the miles they drive instead of the gallons of fuel they buy, something most states have already started exploring. For the national effort to prove helpful, transportation experts say, it should remain simple.
The goal should be to “only test what absolutely needs to be tested at the federal level” for imposing mileage fees on passenger vehicles, wrote experts from the Eno Center for Transportation, a nonpartisan think tank in Washington, D.C., in a recent report. They pointed out that dozens of states have already explored different ways of rolling out mileage taxes.
Federal officials should also avoid using overly complicated rates that would, for example, reward people for using fuel efficient vehicles or buying smaller vehicles, they cautioned.
“More complex rate structures,” they wrote, “meander away from the main goal of a national pilot: to find a sustainable alternative transportation revenue source. While they would create revenue, they also aim to accomplish other policy goals. Regardless of the merits of those policy goals, their addition to this pilot will likely decrease its political viability.”
The report from the Eno Center, based on feedback from several state transportation departments and other industry experts, is essentially a study guide to help federal officials roll out a national test of mileage taxes.
Congress included the requirement in its 2021 infrastructure law because federal gas and diesel taxes have fallen short of demands for highway funding for 15 years. Congress directed $272 billion since then to keep the Highway Trust Fund solvent.
The long-standing problems with federal transportation funding stem from the fact that Congress hasn’t raised the 18.4-cent-per-gallon gasoline tax since 1993 and from the fact that vehicles have become more fuel efficient. The recent push to promote electric vehicles instead of cars and trucks running on fossil fuels will only exacerbate the problems, the Eno authors warned. “Threats to transportation funding are not only still present,” the researchers wrote, “they are magnified.”
States have been preparing for a switch in the way road funds are raised for nearly two decades, with Oregon in particular exploring ways to make a mileage fee feasible. Thirty-seven states and the District of Columbia have researched mileage fees or launched pilot programs. None of those programs are mandatory, though, and no state has abandoned its existing fuel taxes.
But the national pilot program would be the largest, by far.
The Infrastructure Investment and Jobs Act requires the federal Transportation Department to recruit participants from all 50 states, Washington, D.C., and Puerto Rico. It would include both passenger vehicles and commercial vehicles including trucks.
The goal of the five-year experiment would be to develop recommendations for a national mileage fee, which would shore up federal surface transportation funding. Congress could then adopt those recommendations or take another approach.
“The largest unknown for a national VMT [vehicle-miles traveled] fee is implementation on all private passenger vehicles,” the Eno authors wrote. “There are still no widespread programs anywhere in the world that impose a fee on all passenger vehicles.”
The state pilot programs can offer guidance, but there are problems unique to the federal government that would have to be addressed in the national test. For example, the federal government does not have a department of motor vehicles that tracks who owns which vehicles. It might have to consider how to include vehicles coming from Mexico or Canada. And the federal experiment would have to account for state mileage fee experiments, because imposing two kinds of mileage fees on the same drivers could be confusing or even impossible with technology restraints.
The Eno authors suggested that the federal government could simplify the administration of mileage taxes if only a single government agency collected the money and then distributed it to other levels of government. Either states could collect the taxes and then give the federal government its share, or vice versa.
A similar arrangement could help states account for vehicles that cross state lines, the researchers said. The state-to-state revenue sharing could be similar to a system created in 1991 called the International Fuel Tax Agreement.
“Before IFTA,” the researchers noted, “each state had its own fuel tax system for heavy vehicles and a truck needed to buy permits for each state that it drove through. IFTA simplified this system by allowing truck operators to file and pay in their home state, and then the money would be redistributed based on where fuel had been purchased and miles had been driven.”
Another way to simplify administration of a national system would be to use private companies to manage the accounts of individual users. Every state with a VMT pilot project uses one of the vendors, called commercial account managers, such as Azuga or Emovis. Oregon is the only state that also offers in-house account management as an option to its participants alongside both Azuga and Emovis, they noted.
The national pilot program should treat trucks differently than passenger vehicles, the Eno authors warned. “It is clear that trucks are not ‘big cars,’ and they require their own treatment under a VMT fee,” they wrote.
For one thing, trucks would have to have their own rate structure. Experiments that charged flat fees for each mile ended up punishing fuel efficient fleets, they noted. Efforts to base the fees on average fuel efficiency weren’t reliable enough. Federal regulators could charge trucks based on their registered gross weight, a common metric already used in the industry. Or they could use other weight standards or vehicle classifications, the authors suggested.
“Regardless of what rate structures are piloted, simplicity for both the sake of the pilot and the sake of potential implementation will be key,” they wrote.
“Complicated rate structures that require increased reporting or weight measurements from the trucking industry will be impractical. While a rate structure based on the actual weight for each mile driven would most accurately charge for road usage as measured by road damage, the increased cost and burden would not be worth the small revenue increase you might see from this accuracy,” they added.
Another aspect of the infrastructure law’s pilot program allows an advisory board to conduct an education campaign about the mileage taxes. But Eno researchers said that money would be best spent educating the public about the “transportation funding crisis” in general, rather than advocate specifically for mileage fees.
Pushing for a national mileage tax would be “premature as it is not clear if VMT fees will be implementable at the federal level,” they wrote. “The limited pilot resources would be better spent other ways.”
Daniel C. Vock is a senior reporter for Route Fifty based in Washington, D.C.