CBO Sees Benefits in Taxing Motorists Based on Miles Driven

March 25, 2011 - 10:01 AM

gas prices

The federal government is looking beyond fuel taxes for new sources of highway funding. (AP File Photo)

(CNSNews.com) - A new Congressional Budget Office study says taxing motorists based on the number of miles they drive would be a fair and "efficient" way to charge motorists for the real cost of using the nation's highways. "Vehicle-miles traveled" taxes (or VMT taxes) also would provide a strong incentive for people to drive less.

Transportation Secretary Ray LaHood floated the idea of a VMT tax one month after President Obama took office, but Obama’s spokesman immediately shot it down. "It is not and will not be the policy of the Obama administration," White House press secretary Robert Gibbs told reporters in February 2009.

But that was then.

The CBO study, released this week, says the federal government pays in part for about 25 percent of the nation's highways, which carry about 85 percent of all road traffic. Right now, federal spending on those highways is funded mainly by taxes on gasoline and diesel fuel, but those taxes do not raise enough money to support either the current federal spending on highways -- or the higher spending levels that some transportation planners advocate.

The CBO said most of the costs of using a highway, including pavement damage, congestion, accidents, and noise, are tied more closely to the number of miles traveled than to the amount of fuel consumed.

While raising fuel taxes would bring in more money, the CBO notes that a "fundamental" problem would remain: "By themselves, fuel taxes cannot provide a strong incentive for people to avoid overusing highways," the report said.

On the other hand, VMT taxes would have most motorists paying "substantially more than they do now -- perhaps several times more," the report said. "Such a system would maximize the efficiency of highway use by discouraging trips for which costs exceed benefits."

As for the costs of establishing and operating a nationwide VMT tax, CBO admitted that its estimates are "rough." Metering equipment would have to be installed in all cars and trucks, perhaps "under a mandate to vehicle manufacturers."

The report notes that under a VMT tax, different charges could be applied to achieve certain goals. If the goal is to "maximize the efficiency of highway use," drivers might be required to pay according to the type of vehicle they drive (heavy truck vs. passenger car), the time a vehicle uses the road (rush hour vs. off-peak hours), and where vehicles are traveling (city streets vs. less congested roads).

"The idea of imposing VMT taxes that vary by time and place has raised concerns about privacy because the process of assessing such taxes could give the government access to specific information about how individual vehicles are used," the report says.

CBO offers various suggestions to address those concerns, including restricting the amount of information about a vehicle's travel that is used in billing or restricting the kind of information that is conveyed to the government; making tracking devices appealing to the public by allowing them to be used for other services, such as real-time traffic reports or electronic payment for parking; and allowing users to opt out of paying per-mile charges and pay higher fuel taxes instead. "The optional fuel taxes would be set at rates high enough to appeal only to users with the greatest privacy concerns," the report said.

The CBO prepared the study at the request of the Senate Budget Committee.

Also see:
Obama Administration Says No to Transportation Secretary’s Mileage Tax Idea (20 Feb. 2009)
Top Lawmaker Wants Mileage-Based Tax on Vehicles (28 April 2009)