As Americans struggle to recover from the pandemic, their progress is hampered by the rising costs of groceries, rent and especially gasoline. In fact, the cost of gas is at a 10 year high, rising 42 percent year over year.  Is now a good time to implement a vehicle mileage tax?  Some congressional leaders think so and have included a VMT pilot program in the $1 trillion infrastructure package.

The pilot program is part of the 2,700-page bill passed by the U.S. Senate on August 10th and is now waiting for a vote from the House. It earmarks $125 million to test a national VMT with $10 million allocated each year from 2022 to 2026.  During the same time period, state agencies will receive $15 million a year to test the feasibility of a VMT. Results would be gathered from volunteers driving both passenger and commercial vehicles in all 50 states.  Miles would be tracked with either a GPS device installed in the car, or by monitoring location apps on the driver’s phone (objections have been raised about the government tracking private citizens’ movement).

Why would we need a new tax? Because per gallon gas taxes are falling as the miles per gallon  of newer cars increases. TRIP, a nonprofit organization that researches, evaluates, and distributes economic and technical data on surface transportation issues, reports that “Average fuel efficiency is expected to increase 31 percent by 2030, to 32 miles per gallon, and increase 51 percent by 2040, to 37 miles per gallon.” Include the rising number of electric vehicles on the road and our federal government, and individual states, are having a hard time paying for road and bridge maintenance and construction.  

According to the Highway Trust Fund, there were 1.8 million electronic vehicles on the roads in 2020, making up only .5 percent of all passenger vehicles.  In just one year, that .5 percent cost the federal government $174.6 million in revenue from gas taxes. President Biden’s goal of electric vehicles totaling half of all vehicle sales by 2030 would create a revenue deficit of $4.5 billion per year.  Given this forecast, it’s not a matter of debate about whether or not the tax will be implemented, that seems to be a given.  The question is whether this tax will replace, or be in addition to, current gas taxes.

New Mexico’s commercial truck drivers already pay both since our state is one of only four to impose a weight-distance tax on owners, operators, and registrants of intra and interstate commercial vehicles. Current rates are:

 

Gross Vehicle Weight                         Tax per mile:

26,001 to 54,000 lbs.                          $0.12

54,001 to 72,000 lbs.                          $0.15

72,001 and above                               $0.16

 

The weight-distance tax is the fourth-largest contributor to the State Road Fund, after the gas tax, special fuel tax, and vehicle registration fees. However, according to some state lawmakers, the weight-distance tax, combined with the current 17 cents a gallon state tax, is still not enough.  Senate Bill 168, sponsored this past session by Senators Roberto Gonzales (D-6) and Bill Tallman (D-18), proposed to increase the per gallon state tax a penny a year for five years until it reached 22 cents a gallon.  Time ran out before the bill was heard in its assigned committees, but Tiffany Rivera, Director of Governmental Affairs for New Mexico Farm & Livestock Bureau anticipates this will be a reoccurring piece of legislation. 

Whether it’s a VMT or an increase in the per gallon gasoline tax, either would be a hardship for many New Mexicans who live in rural areas.  Trips to visit family, to the doctor, or to the county courthouse could become prohibitively expensive.  While rumors on social media spoke of a possible VMT of 8 cents per gallon tax, the cost would most likely be around .05 cents, similar to one recently enacted, on a trial basis, in California. This would increase the price of a round trip from Roswell to Albuquerque by $20.  

Unfortunately, the VMT has broad support from the President and Transportation Secretary Pete Buttigieg. “If we believe in the user-pays principle—the idea that how we pay for roads is based on how much you drive—the gas tax used to be the obvious way to do it. It’s not anymore,” said Buttigieg during a CNBC interview.

But while this tax would raise funds for government spending, it also has ripple effects throughout the economy.  Recent research from Customer Growth Partners shows that “each dime of increase at the pump takes $1.3 billion a month out of retail spending.” Increased gas taxes would have a significant, negative impact on New Mexico’s economy.  For now, the $1 trillion infrastructure bill, which includes the VMT pilot program, is being held up as congress debates the larger $3.5 trillion human infrastructure plan.  It’s anyone’s guess as to what happens next, but if a VMT becomes a reality, rural citizens will disproportionately bear the brunt of the tax.