April's terrible, tragic tornado toll;
IRS offers relief for more storm victims
Last week at my other tax blog: Who gets taxed how much and states vs. Amazon

Per-mile tax taken for a brief test drive

Just as we're about to hit the road on our summer vacations, there's talk of making us pay a per-mile tax. Say it ain't so!

It is so. But it's also just talk.

Yes, the Department of Transportation last week floated the possibility of instituting a per-mile tax as a possible replacement for or supplement to the federal fuel tax system.

Sure, such taxes are on the books in Europe. And yes, New York City officials even tried a few years ago to implement a congestion fee to reduce driving in the Big Apple.

But this latest discussion of a federal mileage tax isn't going to move any measurable distance down the tax road.

New ways to pay for roads: Current fuel excise taxes on gasoline and diesel go to the highway trust fund.

The 18.4 cents federal fee on each gallon of gasoline and 24.4 cents for each gallon of diesel haven't been increased since 1993. Those tax rates aren't cutting it.

A Congressional Budget Office report says that since 2008, the highway fund has come up about $30 billion short to pay for federal spending on America's roadways.

So who can blame the Transportation folks for taking new revenue raiser out for a test drive? The problem is, this latest version of a driving tax stalled before it made it off Capitol Hill.

The same thing happened two years ago when the Transportation Secretary suggested a vehicle miles traveled tax, or VMT.

Now as in 2009, car crazy U.S. drivers, not to mention Republicans, freaked out and the White House disavowed this latest proposal even more quickly than the GOP dropped its Medicare reform budget provisions.

Eroding gas tax collections: Uncle Sam is in a tough spot when it comes to ways to shore up transportation funds.

Exxon OMG gas price board 030111_Johnny Frederic Every time gas prices jump -- a gallon of regular now costs more than $4 in some places; three years ago, pump prices neared the $4 mark -- people cut back on their driving.

Add to that the increase in more fuel efficient cars on the road, many of which were purchased under the 2010 federal Cash for Clunkers program. Those vehicles need fewer fill-ups, meaning less money for the highway trust fund.

A fairer tax? Some transportation experts say a mileage tax is a fairer way of getting highway money. Those who drive the most would be the ones paying for upkeep of the asphalt infrastructure.

Folks who advocate a national sales tax in place of an income tax also might be inclined to support a per-mile tax. The theory behind both is that consumers would know what taxes they would pay and could simply decide not to purchase goods (or gas) if they weren't willing or able to pay the extra cost.

A mileage tax also would force all motorists to pay closer attention to our driving patterns. We might better plan our trips, batching errands or car pooling more.

Plus, those of us with compact cars that get decent mileage would be on a more level roadway with drivers of hybrid or alternative fuel vehicles. Yes, they'd still get better mileage, but a mile would be the same 5,280 taxable feet for all of us.

Devil in the driving details: The key issue would be how to administer such a per-mile tax.

One suggestion is the installation of a tracking device in vehicles to measure miles traveled. Good luck with that!

There's already a huge outcry against the intrusiveness of government. And we Americans, regardless of what the courts might say, still consider our cars a rolling extension of our homes.

OK, let's have everyone track their miles in a log. Again, good luck.

The IRS has enough trouble getting folks to keep accurate records of their deductible business mileage. If they're not going to maintain good records of driving when it benefits them, what makes Uncle Sam think they'll do a better job when it would cost them?

And when and how would the tax be collected? Monthly? Annually, when we file our tax returns? Perhaps when vehicle tags are renewed? If the tax is levied in conjunction with license plate issuance, would states collect the fee and then pass it along to Washington? What would be the costs there and who would cover those?

The draft transportation bill, which was acquired by Transportation Weekly and then published by The Hill newspaper, reveals those and some other details of the proposal. OK, it reveals a lot of details; it's 499 PDF pages long.

A more succinct section-by-section analysis (only 61 PDF pages) was put out by the publisher BNA.

A key portion of the measure calls for the creation of a Surface Transportation Revenue Alternatives office within the Federal Highway Administration. The new office would be in charge of conducting field trials to examine four factors:

  • The capability of states to enforce payment,
  • The reliability of technology,
  • Administrative costs, and
  • User acceptance.

The Surface Transportation Revenue Alternatives (I can't believe they didn't call it Surface Transportation Alternative Revenue so the acronym would be STAR) office reportedly would get $200 million through fiscal year 2017.

The bottom line, however, is the word "would."

Given the high price of gasoline and the political climate, the vehicle mile traveled tax is going nowhere fast.

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