The high-priced reality of a national vehicle miles traveled tax
The American Transportation Research Institute (ATRI) released a new report detailing the costs of deploying and operating a tax on national vehicle miles traveled (VMT) and was identified as a top research priority by ATRI’s Research Advisory Committee in 2020.
With the goal of understanding the opportunities and challenges of a federal system, the research first explored the technical and administrative requirements of charging every U.S. driver for miles driven. Next, the costs of operating a VMT tax program were calculated, including those associated with technology, data communications and account management.
ATRI determined that replacing the federal fuel tax with a VMT tax that is assessed on 272 million private vehicles could result in collection costs of more than $20 billion annually — or 300 times higher than the federal fuel tax. According to ATRI, the central reason for this large increase in costs is the shift in collection points — from a couple of hundred fuel terminal operators to every registered motor vehicle in the U.S.
“It’s clear that a VMT tax is a far more complicated and costly replacement for the fuel tax than many had anticipated,” said Jim Burg, president and CEO of James Burg Trucking Company. “If a system like this is going to work for everyone, many years of thoughtful planning and federal leadership are needed.”
The report found that hardware costs alone would have an initial price tag of $13.6 billion and require ongoing replacement, telecommunications costs would be approximately $13 billion annually, and account administration would be an additional $4.3 billion each year. On top of these costs, credit card transactions for electronic payment and even the shipping costs for the hardware could each cost more than $1 billion.
The American Trucking Association (ATA) published a thread of tweets outlining the report, highlighting 12 major points that could have the biggest impact on the industry.
“Compliance is a major challenge,” ATA pointed out. “Even a federal system will likely have to rely on state or local enforcement agencies to prevent significant evasion. Some sort of compliance monitoring system, along with a fine structure, will be needed to prevent evasion.”
“With policymakers preparing to lay out a vision for the future of America’s infrastructure, ATRI’s analysis could not come at a more critical time,” said ATA President and CEO Chris Spear. “Most experts agree that some sort of VMT system is a part of that future, and ATRI’s report makes clear that implementing it will take thoughtful leadership, cooperation from stakeholders and a strong plan to transition away from current funding streams.”
On March 16, the Owner-Operator Independent Drivers Association (OOIDA) sent a letter to the U.S. Senate Committee on Finance saying any proposals that impose a truck-only vehicle miles traveled tax are a “no go.”
“We understand that many elected officials lack the courage to raise fuel taxes,” said OOIDA President Todd Spencer. “But singling out trucks to carry all the weight is discriminatory and doesn’t address the real reason for a dwindling revenue stream.”
Lawmakers on the committee have looked at the possibility of including a VMT in the next surface transportation reauthorization to raise revenue for the declining Highway Trust Fund. The letter dispels the myth that trucking doesn’t pay enough into the highway trust fund.
“Preposterous,” said Spencer. “We not only have always paid more than what is fair, we’re willing to pay more to improve our crumbling infrastructure, but we refuse to be singled out.”
The letter also questions the timing of the proposal, which comes after months of lawmakers in Washington praising truckers for keeping goods moving during the COVID-19 pandemic.
“Now you want them to fix funding shortfalls that they didn’t cause because you don’t have the guts to increase fees for all highway users,” added Spencer. “Congress is responsible for deficit spending and the lack of sustainable funding for the HTF, not truckers. Congress created this mess, not truckers. Truckers are willing to fix it, but not alone.”