The new national motor vehicle per-mile “user fee” pilot program found in Title III of H. R. 3684 is merely a regressive tax by another name. While pundits argue about the costs and benefits of a commercial vehicle mileage tax, the inclusion of passenger vehicles in the program should be a huge red flag for citizens concerned about their growing tax burden.
The Big Picture
The massive price tag of the recent infrastructure package — taken together with the upcoming fight over the Biden administration’s proposed $3.5 trillion budget — has left Democrats in Congress scrambling to find new revenue streams for their reckless spending spree. President Biden promised the American people that these spendthrift policies would be paid for by raising taxes on the wealthy. It is now clear that this was a delusion at best.
One area that disproportionately burdens low-income earners up to 10 times more than higher-income individuals is the gas tax that funds surface transportation projects through the Highway Trust Fund (HTF). President Biden and Transportation Secretary Buttigieg repeatedly promised that these taxes would be left alone. While they technically did not change the federal gas tax, a new pilot program to demonstrate different models of a national vehicle mileage tax will likely raise the federal tax burden on anyone who drives a vehicle.
The Highway Trust Fund
- Established in 1956, the Highway Trust Fund receives revenue from the federal gas tax to be used on surface transportation.
- The HTF is split into two sections with the larger Highway Account being earmarked for road construction and maintenance and the smaller Mass Transit Account being used for public transit projects.
- Currently, the HTF is funded by an 18.4 cent per gallon federal tax on gasoline and a 24.4 cent per gallon tax on diesel.
- While academics debate the degree to which the gas tax is regressive, most perceive such excise taxes as having a disparate impact on low-income earners.
- The HTF is rapidly approaching financial insolvency.
VMT and the Gas Tax
- Title III of H.R. 3684 includes $58 million over the next four years in new spending for research and development of new programs related to transportation and infrastructure and gives $10 million to establish a pilot program for a federal VMT.
- In March, Transportation Secretary Pete Buttigieg told CNBC that a mileage based tax for motor vehicles “shows a lot of promise.”
- Three days later, after receiving flack for his comment, Secretary Buttigieg told Jake Tapper that a mileage tax was “not part of the conversation about this infrastructure bill.”
- The VMT would institute a new federal tax on top of the gas tax for every mile driven by both commercial and passenger vehicles.
- One of the biggest questions to be considered by the pilot program is the method by which miles driven is calculated for the purposes of taxation.
Why It Matters
While this VMT program is ostensibly temporary, the clear intention of this proposal is to examine different options for a VMT to eventually make the program permanent. As with most other areas of federal programming, even temporary programs have an uncanny tendency to far outlast their original approval. It is incredibly likely that a permanent national VMT will be foisted upon the American public in the near future.
Furthermore, President Biden and his administration have consistently claimed that they will not raise taxes on low-income earners and the middle class in order to pay for their spending spree. The new VMT pilot program demonstrates that this is not the case. As with every other promise in American history to “soak the rich” in taxes to pay for increased spending, the end result is always higher effective tax rates on the lower segments of the tax bracket.