Section 13002 of the infrastructure bill that the senate passed last week calls for the secretaries of transportation and the treasury to create a pilot mileage-based user fee program. The last transportation bill, which was passed in 2015, offered states grants to create their own pilot programs, but only six states did so, and some of them are not currently active.
The proposed infrastructure bill extends the state program (in section 13001), but also creates a national pilot program. If passed, the Secretary of Transportation would first create an advisory board that would take up to a year to design the program. Then the Secretary of the Treasury would set fees, which could differ by size of motor vehicle. Then the two secretaries would do a “public awareness campaign” to try to find geographically and economically distributed volunteers to participate in the program.
Fees could be charged via smart-phone apps, third-party GPS devices plugged into the diagnostic ports of cars (which is one way Oregon does it), data collected by automakers (such as GM’s OneStar system, which keeps track of vehicle locations in case of an accident), data collected by insurance companies (which can charge people by the mile using a similar GPS device in at least eight states), or “any other method that the Secretary considers appropriate.”
All monies would go into the Highway Trust Fund. However, the section contains an odd provision: “Not more than 60 days after the end of each calendar quarter in which a volunteer participant has participated in the pilot program,” it says, “the Secretary of the Treasury, in consultation with the Secretary of Transportation, shall estimate an amount of payment for each volunteer based on the vehicle miles submitted by the volunteer for the calendar quarter and issue such payment to such volunteer participant.” Does this mean volunteers will be paid to participate?
Apparently, this paragraph was included because President Biden has promised not to raise taxes on people earning less than $400,000 a year. According to the White House, this program doesn’t break that promise because participants will receive “full refunds.” However, that isn’t strictly required by the above paragraph, which could be construed to mean that people will be refunded the gas taxes they pay so they aren’t double-taxed. I suspect whoever wrote this section kept it vague for a reason.
The purposes of the pilot project are to determine whether per-mile fees can “maintain the solvency of the Highway Trust Fund,” protect people’s privacy, and what the impact of such fees would be on low-income people. The only reason why the trust fund is insolvent is that Congress insists on spending more money that it takes in, but an important issue is how much it would cost to collect mileage-based fees as opposed to gas taxes, which are cheap to collect. In any case, it is possible that these questions could be answered in a pilot project even if all of the revenues are refunded to volunteers.
As a participant in Oregon’s pilot program, I’m a strong proponent of mileage-based user fees. Such fees can potentially correct several flaws with the gas tax, including that they can signal motorists what roads are more expensive to use, signal highway officials as to what roads motorists most want to use, pay for city and county roads that are now paid for mostly out of general funds, and use variable pricing to fix congestion.
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At the same time, my support for mileage-based fees is based on two conditions: first that the funds collected be spent on the roads people use and second that privacy is protected. Protection of privacy is mentioned several times in the bill, but the bill offers no assurance that collected fees will be spent on roads. In fact, since they are going into the Highway Trust Fund, it is likely that a significant chunk would be spent on transit (unless they are refunded to volunteers in the pilot project).
Some press reports call this proposal a “per-mile tax,” but it is only a tax if people other than the payers benefit from the revenues. If people are getting what they paid for, then it is a fee. By the same token, such fees are equitable across income groups provided, again, that people get what they pay for. They become regressive taxes only if funds disproportionately paid by low-income people are diverted to non-highway uses.
The money collected under Oregon’s pilot program all goes for roads. Moreover, the Oregon Department of Transportation has made it clear that it sees per-mile fees as a replacement for, not a supplement to, fuel taxes. Some groups, however, want per-mile fees on top of existing fuel taxes so that there will be a bigger pot of money to spend on roads and, of course, transit.”
An equally important question is whether the federal government should be involved in per-mile fee collection at all. The federal government can justify its involvement in highway construction because it can collect gas taxes at a lower cost than the states. (The feds get gas taxes directly from refiners and importers while the states collect them at the pump.) However, there is no such benefit for per-mile fees.
On one hand, a federal program might hasten state conversion to per-mile fees, which (conditional on privacy and that road fees are spent on roads) would be a good thing. On the other hand, state voters and legislators can write constitutional amendments limiting the use of such fees to roads, while there is no similar ability to do so at the federal level. Thus, federal fees are more likely to be raided by other interest groups than state fees. On balance, I lean against federal fee programs.
Transportation works best if it is part of a market system where people pay for what they use and don’t have to pay for what other people use. A per-mile fee system comes closer to that than gas taxes, but it can also be abused. The potential for such abuse is not a reason to oppose it, but it is a reason to be wary of federal involvement in fee collection and transportation finance.
If you believe government gives two shits about your privacy and will actually keep their word, you are smoking crack and I have a bridge to sell you.