A ‘Miles Traveled Tax’ Is An Absolutely Terrible Idea
Such a tax would burden Americans who need to drive to get to work and would likely come on top of the existing federal gas tax.
During the 2020 Presidential campaign, Joe Biden pledged no less than 56 times that “nobody making less than $400,000 would have to pay a penny more in tax” during his administration.
Now Joe Biden’s Transportation Secretary Pete Buttigieg is claiming officials in the Biden administration have considered breaking this promise with a new tax that would hit every American who drives a car.
Buttigieg told CNBC during an interview last week that a new vehicle miles traveled (VMT) tax “shows a lot of promise” and “could be part of the mix” to pay for Biden’s $2.25 trillion infrastructure plan.
The clip of Buttigieg’s call for a miles traveled tax quickly went viral and led to an embarrassing walk back for Buttigieg after it was pointed out that a miles traveled tax would be a clear violation of Biden’s $400,000 tax pledge.
Despite Buttigieg’s apparent walk back, a VMT is gaining momentum with Democratic lawmakers. In fact, the attention a VMT is receiving from top lawmakers and Biden Cabinet members warrants further scrutiny from taxpayers.
A VMT is often pitched by proponents as a necessary replacement for gas taxes to address the growing “gap” in the Highway Trust Fund caused by increasingly fuel-efficient cars and the growing number of electric vehicles (EVs) which don’t pay gas taxes.
A myth to immediately dispel here is the notion that a miles traveled tax would replace the 18.4 cents/gallon gas tax rather than be thrown on top of it. The federal government hasn’t cut the gas tax since 1934 and it’s difficult to imagine the same Democrat lawmakers pushing the Green New Deal agreeing to cut taxes on fossil fuels. Even if the gas tax were somehow repealed and replaced with a VMT, the proposal would almost certainly score as a tax increase given the stated goal is to address declining revenue from the gas tax.
In addition to raising taxes, the two options for implementing a VMT would both require significant administrative burdens while growing the size and role of government.
The first method would require installing a GPS device in every vehicle that would track both vehicle location and miles traveled while transmitting the data to the federal government. The government would know every time you exceed the speed limit, run through a red light or illegally park. A federal GPS tracking program would be constitutionally dubious as the Supreme Court unanimously ruled in 2012 that the placement of a device on a vehicle without a warrant and using it to monitor the vehicle’s movements was covered by U.S. constitutional protections against unreasonable searches and seizures of evidence.
The alternative to GPS tracking would be annual odometer readings done at yearly inspections. While odometer readings would reduce privacy concerns, it would likely incentivize wide-scale fraud and abuse from vehicle owners. The National Highway Traffic Safety Administration (NHTSA) estimates that more than 450,000 cars are sold each year with false odometer readings. Imagine the expansion of odometer fraud if the financial incentive of a lower reading expanded from the used car market to every American’s tax bill, especially when odometer correction devices can be easily purchased online.
Enforcement of such a system would require a dramatic increase of staff at the Internal Revenue Service to audit the odometers of the 289.5 million vehicles registered across the nation. Do Americans really want IRS agents knocking on their door demanding to see the mileage of their car?
At best, a VMT is an overly technocratic idea when the clear option is to allow state and local governments to lead the way. State and local governments already account for three-quarters of highway and road funding and are maintaining the same levels of revenue available for infrastructure that they have since the 1980s. While Democrats complain that the federal gas tax hasn’t been raised since 1994, thirty-six states have raised their gas taxes over the last decade, often doing so with revenue-neutral proposals.
Road and bridge decisions can be made at the state level where infrastructure is used.
A federal miles-traveled tax would only further centralize infrastructure decisions in Washington.
Mike Palicz is Federal Affairs Manager at Americans for Tax Reform.