CBO says taxing cars by the mile could raise money for highways

The Congressional Budget Office (CBO) on Tuesday said the imposition of a new tax on cars and trucks based on how many miles they drive would be one way of generating revenues for the federal Highway Trust Fund.

Joseph Kile, CBO’s assistant director for microeconomic studies, told the Senate Finance Committee that a tax on vehicle miles traveled (VMT) would help the Highway Trust Fund meet its spending goals, in particular because the Fund is already spending more than it collects through the federal gas tax. 

But he also said the tax would better align highway costs with revenue generation, and promote the more efficient use of the highway system.

{mosads}”Although taxes currently are charged for fuel, most of the cost of using a highway, especially the cost of pavement damage and congestion, are tied more closely to the number of miles traveled than to the amount of fuel consumed,” Kile told senators.

“Charging users based on the cost they impose would require a combination of fuel taxes and per-mile charges, sometimes called VMT taxes,” he added. “Imposing such prices would encourage motorists to use the highways only when the benefits to them outweigh the costs, and a system like that would also reduce highway use and thus future spending.”

Kile added in his prepared remarks before the committee that revenues could also be generated in ways not related to driving. However, he seemed to downplay that idea because this would “not promote efficient use of highways.”

The nonpartisan CBO in its testimony did not offer any specific policy recommendations for how to shore up the highway trust fund. Kile said the U.S. currently spends about $160 billion annually on highways from federal, state and local funds.

Kile said other options include limiting spending to the amount of gas tax collected, which would require cuts to spending from current levels.

Revenue proposals for the Highway Trust Fund are being considered because the law authorizing federal highway spending expires at the end of September, and the Department of Transportation has proposed higher spending levels. CBO first proposed a VMT tax as an option in a late March report it sent to Sen. Kent Conrad (D-N.D.).

Earlier this month, it was revealed that the Department of Transportation had written a detailed legislative proposal calling for the creation of an office that would begin field testing of VMT taxes within four years. The White House downplayed that proposal by saying it had not been circulated within the administration and it “does not represent the views of the president.”

This story was updated at 11:32 a.m.


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