Per-Mile Fee Might Fix America’s Poor Roads

Tucked away on page 508 of the 2,702-page bipartisan infrastructure bill is a proposal that could radically restructure how Americans use and pay for the nation’s roads. This radical proposal takes the form of a study that would assess the feasibility of establishing a “national motor vehicle per-mile user fee” and would have road users pay for each mile they drive on the nation’s roads. Introducing a per-mile fee and replacing the current gasoline excise tax would represent a better deal for funding highway maintenance and new projects.

Currently, road users pay for highway maintenance through a federal gas tax of 18.40 cents on gasoline and 24.40 cents on diesel. In total, the federal gas tax raised $36 billion for the federal government. The tax revenue collected from the federal gas tax goes toward the Highway Trust Fund (HTF) and maintaining the country’s roads. However, owing to falling revenue and more efficient car engines, it’s widely estimated that the HTF could be insolvent by 2022.

On top of the federal gas tax, individual states also impose their own levies, ranging from an additional 14.98 cents in Alaska to 66.98 cents in California. It’s estimated that state gas taxes raised $48.2 billion.

One of the principal benefits of a per-mile fee as an alternative to a gasoline tax is it would ensure all road users pay for using it. As electric vehicles do not use gasoline, they don’t pay the gas tax that funds the upkeep of highways. This exemption creates a situation whereby those who drive gasoline-powered cars are left paying for roads, while those who own electric vehicles are free-riders, using the nation’s highways without paying for their maintenance.

A per-mile fee covering all vehicles would ultimately ensure a more equitable funding mechanism and correct the free-rider problem.

Particularly concerning is that high-income Americans have been able to escape paying the gas tax, leaving lower-income Americans to fund the nation’s roads. For example, a study from 2007 found “Americans earning less than $10,000 annually paid an estimated 2.5 percent of their income in gas taxes whereas Americans earning an annual salary of $150,000 and above pay only about 0.2 percent of their incomes in gas taxes.” This discrepancy is caused because higher-income earners can afford exempt electric vehicles that, on average, cost $55,600. A traditional gasoline car, on the other hand, only costs $37,867.

Given that electric vehicles are exempt from the gas tax and therefore exempt from paying for highway upkeep, many states have established fees for electric cars. California, for example, charges a $100 annual fee for electric vehicles, while South Carolina charges a biennial fee of $120 for electric vehicles.

Aside from penalizing those who drive gasoline vehicles, the gas tax has also failed to fund the upkeep of America’s roads adequately. The failure to sufficiently fund the maintenance of America’s roads led the American Society of Civil Engineers (ACSE) to give American roads a D grade. ASCE contends that “43% of our public roadways are in poor or mediocre condition.” ASCE estimates that it would cost approximately $786 billion to improve the quality of America’s roads.

A significant factor contributing to this is that the federal gas tax has not increased since 1993 and the fact it was not pegged to inflation. Failing to peg the federal gas tax to inflation is especially problematic because not only are more and bigger cars using the road, but the cost of maintenance projects has rapidly increased. ACSE estimates that the purchasing power of the gas tax has been cut by 40% since 1993 due to inflationary pressure.

For consumers, a better funding structure could result in real long-term savings for consumers. For example, ACSE estimates the poor condition of America’s roads costs drivers $130 billion each year in vehicle maintenance costs. For each driver, that amounts to about $500 each year. By more efficiently charging for highway upkeep, these costs could be significantly reduced, providing greater economic security for America’s drivers.

While conservatives may oppose the introduction of a per-mile fee on principle, this tax would replace the current excise tax. They should also recognize that it may be the only solution to ensure equality and proper funding for America’s highways and drivers. The current structure, based on a gas tax that seemingly ignores inflationary pressure, for maintaining America’s roads is not only inadequate, but the responsibility is disproportionately falling on low-income Americans who cannot afford the luxury of an electric vehicle.

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