Transportation Funding

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The Way of the Future? Vehicle Miles Traveled Tax in California

The California legislature recently passed a bill that could change how vehicles are taxed. Instead of continuing to use the traditional method of — a tax on fuel consumption — California seems likely to adopt a “Vehicle Miles Traveled” tax. If put into place, this could have an effect on general driving habits, and could pose significant financial problems for trucking companies.

By making this change, California lawmakers (along with Washington and Oregon, who are considering similar programs) are responding to a decrease in the amount of fuel tax revenue the state has received in the past several years. Both a downturn in freight traffic and the rise of fuel efficient vehicles have wreaked havoc with the Golden State’s ability to pay for roads and other transportation-related services, and the Legislature sees this as a way to boost that deficit.

Here’s how it would work in California: The state currently enforces a 53 cent-per-gallon fuel tax (in addition to the federal tax of 18 cents/gallon). They would eliminate that 53 cent tax and replace it with a fee of 5 cents per mile driven. The state would install a GPS tracking device on all vehicles to monitor use, and assess a tax on that basis. Supporters of the tax argue that it will generate more revenue than an increased gas tax would, and would force those who use the roads more to pay for a greater percentage of their upkeep.

(Supporters also advocate for VMTs to be imposed at the federal level, given the Federal Highway Trust Fund’s ever-impending insolvency.)

There are voices (especially in the trucking industry) that oppose the vehicle miles traveled tax. The most common and obvious counterargument is those who drive for a living will bear a disproportionate share of the tax. Some argue that oversight of the VMT tax would be more costly than it’s worth, and suggest that evasion would be common. Others point out the astronomical costs associated with putting the tax in place (i.e., the cost of installing GPS devices in every car). And, perhaps most importantly, is the issue of privacy — many oppose the idea that the state will effectively have the ability to monitor and record the movement of every car on the road. (Some, including Sen. Barbara Boxer of California have suggested that the law could not pass at the federal level for this reason.)

The trucking industry will watch California’s pilot program closely. If adopted, it has the potential to greatly effect the way truckers do business in California and throughout the west.

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