The infrastructure bill includes a road tax test per mile that will track the movements of drivers
Automakers are under pressure from federal and state governments to increase production of electric cars, and US President Joe Biden signs an executive order that seeks half of all new car sales to be electric. by 2030. The industry is turning to battery power and the timeline is rather aggressive.
A puzzle that accompanies the transition to an electrified future is the financing of roads. Today Americans pay at the pump: every gallon of gasoline and diesel is taxed. The federal government receives 18.4 cents, and most states also receive a portion. As fewer cars visit the pump, the amount of tax revenue decreases and must be offset elsewhere, which is addressed in the upcoming infrastructure bill with a pilot program for a national tax per mile.
Tucked within the 2,702-page text is Section 13002, titled “National Driver Per Mile Motor Use Fee.” That pretty much covers the meat and potatoes of this section’s goal: to pilot a program that would tax drivers based on their annual mileage rather than at the pump.
The idea behind this tax is not without merit. The federal fuel tax has remained stagnant at 18.4 cents per gallon since 1993, and it has not been adjusted to account for more fuel-efficient vehicles, nor for inflation, which would put the tax at around 34 cents a gallon today. As alternative-powered vehicles, like electric cars, make up a larger portion of what is on the road today, drivers of fossil-fueled cars will pay a disproportionate amount in taxes to use the same asphalt.
In 2020, about 1.8 million electric vehicles were on the roads of the United States, or about half a percent of all registered passenger vehicles. Considering the average fuel economy and miles driven, that adds up to about $ 97 in missed federal fuel taxes per vehicle each year, which means the federal government is losing $ 174.6 million in revenue per year.
Federal fuel taxes go to the Highway Trust Fund, which the government predicts will be insolvent in the long run with the rise of alternative fuel vehicles. As the concentration of electric vehicles on the road increases, fuel tax revenues will continue to decline. Biden’s goal of having electric cars account for 50% of car sales by 2030 would mean the United States could experience a federal fuel tax deficit of $ 4.5 billion a year, which means that ‘they will eventually seek to increase these incomes by other means. This could happen by increasing the fuel tax for remaining gasoline buyers, implementing a mileage tax, or perhaps even implementing a specific electric vehicle tax for utilities. The infrastructure bill seeks to determine the feasibility of a mileage tax.
As part of the pilot program, volunteers from all 50 states, as well as Washington DC and Puerto Rico, who drive both passenger and utility vehicles, will participate. Vehicle travel data will be recorded and used to bill participants based on mileage, a rate that may vary depending on vehicle type and weight. For example, commercial trucks may pay more due to increased wear and tear on public infrastructure.
The bill specifically notes that this mileage information can be tracked through third-party OBD-II devices, telematics data collected by OEMs, information from insurance companies, a smartphone app, or “any other method that [Secretary of Transportation Pete Buttigieg] considers appropriate. ”It does not address the provisions relating to the confidentiality of such data, nor how it will protect information from bad actors, nor even prohibit the sale of data to non-governmental entities.
A per-kilometer fuel tax is a controversial topic on which many drivers have mixed feelings, and they will likely continue to have shifting opinions as EVs become more prominent on the roads they share. Some states have already considered addressing this issue, choosing to determine whether a tax per mile would make more sense than paying at the pump. Pennsylvania, which has the highest fuel tax in the country at 58.7 cents per gallon, recently began discussions on whether an 8.1 cents per mile tax was appropriate – that would translate into more than 2 cents per mile. $ per gallon of gasoline based on the average fuel economy of a new car.
Meanwhile, if passed, this federal tax would cross President Biden’s “red line” for tax hikes against citizens earning less than $ 400,000. The administration has repeatedly rejected calls for an increase in the federal fuel tax, most recently in June.
If the text passes the final review of the infrastructure bill, the Transportation Secretary will have a year to pilot the program before having to report the results to Congress to determine if it is feasible.
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