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The Tax Man Cometh! Infrastructure bill includes new mileage and gas taxes

Written By | Oct 11, 2021
gas, mileage, tax, infrastructure bill

WASHINGTON: The government loves to spend your money. This is accomplished by more taxation and other user fees. The newest 3.5 trillion dollar infrastructure bill includes a “By The Mile Tax”. Those that are driving electric cars, which the government is pushing, will no longer be skirting road taxes you will now have to pay a piece of the cost for the roads and bridges.  All drivers will be paying an additional by the mile tax, which is already being charged in some major cities. Those drivers who can’t afford newer vehicles or electric vehicles will be burdened with gas and by the mile taxes.

I’m sure some of you are happy to hear about this, but what does this new tax cost the average person? There are some pros and cons – you decide. (Infrastructure Package Includes Vehicle Mileage Tax Program – Forbes)

What is the gas tax or fuel tax?

The government imposes a fuel tax on gasoline and diesel sales. Gas tax revenue is supposed to pay for building and maintaining the nation’s transportation infrastructure. If you’ve seen your local roads lately, there is some construction, but the potholes and poor conditions of many roads and bridges are still unrepaired and potentially dangerous.

The fuel tax includes federal taxes and state taxes. The federal tax for gasoline has been 18.4 cents per gallon since 1993. State gasoline taxes vary. Keep in mind, states can also impose other fees and taxes at the pump. This is why gas prices in say, San Francisco, California are higher than in Atlanta, Georgia.

What is the mileage tax?

The mileage tax – sometimes referred to as a Vehicle-miles Traveled (VMT) tax, is being proposed in various states. This tax would charge drivers a fee based on the number of miles they drove for a given year. The specific rate varies by state but the essential idea would be a “pay-per-mile” system. The tax revenue would then go into the building, maintaining, and repairing roads and infrastructure.

No state has fully implemented a mileage tax for regular vehicles. California, Colorado, Connecticut, Delaware, New Hampshire, Pennsylvania, Oregon, Washington, and others are studying this or have implemented pilot programs in major cities.

The specifics of how a mileage tax would work aren’t clear but one pilot program gives us an idea of how it might work. Taxpayers would log miles through a GPS device, apps, or annual state inspection forms. Whether you would pay by the mile and gas taxes is still not decided.

Hold on to your wallet.

Rates will be around 1.5 cents per mile, which adds up quickly. The average driver clicks about 12,000 miles, which would cost you $1,800 per year. The plans and rates in many states are still in the planning stages, some states are testing tracking drivers and sending out “invoices.

Why is the federal government and states considering the mileage tax?

Feds say the American infrastructure needs more revenue than what is coming from fuel taxes. California Governor Jerry Brown recently said there’s a $59 billion backlog of maintenance needed and the revenue from gas taxes won’t be enough to cover it. California isn’t alone – many states are facing infrastructure issues and not enough funding from traditional gasoline taxes.

Arguments for a mileage tax

The main arguments for a mileage tax center around revenue and fairness.
Supporters say that more fuel-efficient vehicles have reduced taxable gas consumption and leaves less money for roads and bridges. Additionally, there has been no rise in the federal gas tax in more than 20 years. Supporters say there’s simply not enough revenue to maintain the infrastructure or to build the next generation of transportation infrastructure.

Organizations like the Mileage-Based User Fee Alliance argue usage-based taxes on the road are fairer. This turns roads and bridges into utilities like electricity or water: the more you use it, the more you pay.

Arguments against mileage tax

Even if you think the transportation infrastructure needs an upgrade, not everyone believes this is the best way to do it. The main arguments against a mileage tax center on privacy, fairness, and revenue.

Polls suggest people don’t like the government knowing where they are and where they are going. They especially don’t like it when tied to taxation.

Many are concerned about how the government would collect this data. Others fear how the data would be stored, as well as other purposes this information would be used for and, violates our rights.

Another argument against a mileage tax is that it’s not fair. Some people specifically purchased a high-efficiency vehicle to avoid gas costs and gas taxes. Bicyclists use the roads and they don’t pay taxes either. Some think that raising state or federal gas taxes would be a better approach. Mileage taxes have all the negative impacts of a gas tax with none of the positive impacts.

Here’s the Bottom line:

The mileage tax may not even raise the revenue promised. As much as 40 percent of the revenue generated by the mileage tax could go to private companies. Factoring in all the fee collection, a mileage tax might not produce as much tax revenue as the existing or raising gas taxes. This means the federal and state governments will add the by the mile tax to your fuel taxes. This will cost every driver an additional $1500 or more per year. Are frustrated yet – I am!

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Lauren Fix

Lauren Fix, The Car Coach®, is a nationally recognized automotive expert, analyst, author, and television host. A trusted car expert, Lauren provides an insider’s perspective on a wide range of automotive topics and aspects, energy, industry, consumer news and safety issues.