Vehicle Mileage Taxes (VMTs): A Good Idea? Part I - ATA's State Law Newsletter

We did a webinar recently for ATA members on the subject of vehicle mileage taxes, or VMTs, about which everybody seems to be talking these days.  We asked whether VMTs are a good idea for highway finance, and answered that question with a definite NO, at least not any time soon, or to any great extent.  Since summertime usually provides us with a shortage of material for the SLN, we’re going to summarize here, in two or three issues, what we said about VMTs in the webinar.  This week’s issue holds Part I.

A VMT, as its name implies, is a tax measured by the distance a vehicle travels.  At least as applied to passenger cars, the idea is mostly a concept, with which there is practically no experience, since no large-scale VMTs on cars have been attempted, as far as we’re aware, anyplace in the world, and certainly not in this country.  But a VMT on trucks, for reasons of equity that will be evident to our readers, of necessity must include a weight component as well as one of distance.  And VMTs on trucks, under the name of weight-distance, or weight-mile, or axle-mile taxes, have a long history in the U.S. and in some countries abroad.  And a miserable history it is, too!  Weight-distance taxes have been promoted by the railroads for decades, and about half the states have tried them out over the years.  And some twenty states have repealed them.  Only four such taxes remain today, in Kentucky, New Mexico, New York, and Oregon.  The trucking industry may have difficulty reaching consensus on a lot of policy issues, but motor carriers almost universally opposed to weight-distance taxes.  Those taxes have proven in practice to be burdensome and expensive to administer and to comply with, prone to exemptions for special local interests, and open to massive evasion. 

So why all the talk about VMTs today?  To a large degree, those talking about them aren’t aware that the U.S. has such an unfortunate experience with weight-distance.  Nor do they know anything much about tax administration, which teaches that there are good taxes and bad taxes; that is, there are some types of tax that, because of their very structure, just won’t be successful in practice.  Rather, today’s VMT talk seems to center around several perceived problems with the American system of road funding.  First, there’s the general problem that the country badly needs more money for infrastructure of all kinds, and is uncertain where to turn for those funds.  Second, there’s a widespread perception – which is often wildly overblown and mostly false anyhow – that the fuel tax is nearing obsolescence.  People hear about alternative fuels and electric vehicles, and believe that younger generations aren’t driving much, and come to believe the fuel tax can’t any longer raise adequate highway money.  Finally, and perhaps most acute, there’s the political problem:  politicians, especially of one party rather than the other, are reluctant these days to raise any tax, and are looking for ways of funding infrastructure that don’t – or apparently don’t – require a tax increase.  Yes, that T in VMT stands for Tax, but some alternative names – Mileage-Based User Fee, or Road-User Charge – don’t have the T-word in the title, and there’s no doubt some hope that a new tax with a new name will meet with less disapproval from taxpayers.  Consequently, there’s a fair bit of federal money for studying alternative highway-funding options right now, which draws academicians and consultants, and most of it gets spent on that novel concept, the VMT.  So there are a number of VMT pilot projects going on, or being planned, and that backs up the frequent claim that "lots of states are looking at VMTs as a way of replacing the gas tax."  While that may be true, there’s a great deal less in it than meets the eye.  All the pilots are very small-scale, and no state is actively planning to implement a VMT, let alone any time soon.