Out-of-state drivers would still have to be taxed but likely through a different system. CAFE standards were first enacted in 1975 and have worked to improve fuel economy. startxref For the first time in Virginia history vehicles miles traveled increased, and motor fuel taxes, what has been collected decreased, Jessica Cowardin with the DMV said. In 2012, the United States Supreme Court ruled that unwarranted GPS tracking of vehicles was unconstitutional. [7], The motor fuel tax is relatively well-designed and aims to capture the negative externalities caused by driving petroleum-powered vehicles, internalizing the costs of contributions of road wear-and-tear, traffic congestion, and pollution. Based on Figure 1, states have done a better job of keeping rates in line with inflation than the federal government. This would guarantee that motor fuel tax rates would follow developments both in technology and in inflation and maintain cents raised per VMT. [9] This means that the motor fuel tax would ideally tax drivers based on the proportionate damage they do to the roads, among other externalities. States have an added complication regarding out-of-state drivers if no federal system exists. (Potentially a standard, higher rate could apply to vehicles without such a device. According to CBO estimates, the Highway Trust Fund will run out of money by the end of 2021 and the deficit is projected to be almost $70 billion over the first five years after the FAST Act funding expires. While marginal tax rates show the amount of tax paid on the next dollar earned, average tax rates show the overall share of income paid in taxes. To strengthen privacy protection, there should also be strict regulation governing data deletion and permissible data use. 0000052469 00000 n Despite inflation, the federal gas tax rate has been locked in at 18.4 cents per gallon since it went up from 14.1 cents in 1993, meaning theres less money to fund highway improvements. HA @s or less go from $40.75 to $30.75 Passenger vehicles This tax is set to expire in 2022 but this year voters get to decide whether to make it permanent. In total, 25 states divert a significant amount of revenue raised from motor fuel taxes to unrelated spending programs like education (Kansas and Texas), tourism (Utah), or wildlife conservation (Florida). On both a federal and a state level, imposing a VMT tax does require lawmakers to make some hard decisions on trade-offs. Senator Steve Newman is hoping for a change in legislation. A gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. [14] This would be a problem for states and the federal government in the long term, but a state like California, where EVs and hybrids already make up almost 8 percent of auto sales, may be impacted sooner. Washington, DC 20005, Banner image attribution: Adobe Stock, zephyr_p, Tax Expenditures, Credits, and Deductions, Tax Reform Plan for Growth and Opportunity, Location Matters: State Tax Costs of Doing Business, Tax Reforms for Mobility and Modernization, Consumption Tax Policies in OECD Countries, Matching Federal Outlays Would Result in Federal Rate Increase, https://www.fhwa.dot.gov/policyinformation/statistics/2018/fa4.cfm, https://taxfoundation.org/when-did-your-state-enact-its-gas-tax/, https://itep.org/how-long-has-it-been-since-your-state-raised-its-gas-tax-maps/, https://www.cbo.gov/system/files/2020-03/51300-2020-03-highwaytrustfund.pdf, https://www.api.org/~/media/Files/Statistics/State-Motor-Fuel-Taxes-Charts-July-2020.pdf, https://taxfoundation.org/electric-vehicles-gas-tax/, https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy, https://www.eia.gov/outlooks/aeo/pdf/aeo2020.pdf, https://www.bloomberg.com/news/articles/2019-07-23/why-charging-electric-cars-for-road-use-is-tricky, https://evadoption.com/ev-sales/ev-sales-forecasts/, https://taxfoundation.org/cigarette-tax-revenue-tool/, https://www.consumerreports.org/suvs/americas-favorite-cars-suvs/, https://www.cbsnews.com/news/suvs-are-running-sedans-off-the-american-roads/, https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100YVK3.pdf, https://www.eia.gov/totalenergy/data/annual/showtext.php?t=pTB0208, https://www.eia.gov/opendata/qb.php?category=711246&sdid=TOTAL.PCFRRUS.A, https://taxfoundation.org/gas-tax-revenue-decline-as-traffic-drops/, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/49910-infrastructure.pdf, https://www.gao.gov/assets/130/127292.pdf, https://taxfoundation.org/federal-gas-tax-falls-behind-oecd-peers/, https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/05-17-highwayfunding.pdf, https://www.cbo.gov/system/files/2020-05/56346-CBO-Highway-Reauthorization.pdf, https://www.gao.gov/assets/660/650863.pdf, https://gov.oregonlive.com/bill/2013/SB810/, http://www.nbcnews.com/id/20216302/ns/technology_and_science-tech_and_gadgets/t/e-zpass-records-out-cheaters-divorce-court/, https://supreme.justia.com/cases/federal/us/565/400/, https://www.cbo.gov/system/files/2019-10/55688-CBO-VMT-Tax.pdf, http://www.cbo.gov/sites/default/files/45416-TransportationScoring.pdf, https://taxfoundation.org/options-fix-highway-trust-fund/, https://taxfoundation.org/federal-infrastructure-bill-cbo-effects-of-federal-investment/, https://www.enr.com/articles/49743-maryland-shortlists-four-teams-for-planned-11b-p3-highway-project, https://www.fhwa.dot.gov/infrastructure/tollroad.cfm, https://reason.org/policy-brief/how-much-gas-tax-money-states-divert-away-from-roads/#new-york-diversions, https://ballotpedia.org/Arkansas_Transportation_Sales_Tax_Continuation_Amendment_(2020). [48] However, according to federal law, not all roads can be toll roads. Virginias program will be modeled off of the approaches adopted by those states. [16] Mike Monticello, Americas Favorite Cars: SUVs, Consumer Reports, Feb. 28, 2017, https://www.consumerreports.org/suvs/americas-favorite-cars-suvs/; Jerry Edgerton, SUVs are running sedans off the American roads, CBS News, May 3, 2018, https://www.cbsnews.com/news/suvs-are-running-sedans-off-the-american-roads/; and United States Environmental Protection Agency, The 2019 EPA Automotive Trends Report, March 2020, 6, https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100YVK3.pdf. As an example, an 80,000-pound 5-axle tractor trailer causes the same damage to a road as 9,600 cars even if it only weighs 20 times as much. [46] Kyle Pomerleau, Options to Fix the Highway Trust Fund, Tax Foundation, Mar. A simple fee per VMT would not be equal across all vehicle types as it should be differentiated based on weight and number of axles. Essentially, this approach would entail a unique kind of inflation indexing of gas taxes to roughly approximate revenue collections under a VMT. [40] Devising a tracking system that does not run afoul of the Constitution is obviously a prerequisite for using GPS tracking. Electric vehicles pay a flat fee ($88.20 Cash/AET $4.00 Examples include tobacco taxes, sugar taxes, and carbon taxes. Northam from its proposal, vehicle registration fees will be cut by $10, which comes out to a 25% reduction for most Virginians. Discrepancies between tax revenues and highway expenditures will get worse as fuel economy improves, if tax rates are not indexed to inflation, or if share of electric vehicles (EVs) grows. Assessment Methods That means the rest of the expenditures are covered by non-transportation-related tax revenues (see Table 3) collected from people who may not use the roads, or activity not related to road use. A federal VMT tax rate must average 1.7 cents per mile to cover the highway funds expenditures. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and global levels. Questions? 3. or less go from $40.75 to $30.75, Passenger vehicles 4,001 lbs. Outlays are projected to outpace current revenue by a cumulative $189 billion over the next decade. Handing over data about your vehicles location at all times is understandably unpopular, especially when that information is supplied to a government entity which may have less reason to resist a subpoena than, for instance, a private company like a cell phone provider. [43] Another solution may be to expand existing toll and road pricing systems, focusing on congested areas. Clean Special Fuel Plates Heres a breakdown of the new registration fees that will go into effect on July 1: Motorhome registration fees stay the same. This discrepancy between revenue and expenditures breaks with the user-fee principle and limits the effectiveness of taxes on transportation by keeping the price of driving artificially low. [31] This system requires motorists to keep receipts for fuel purchases to guarantee the accuracy of the tax credit, though it is not mandatory. [37] Use of GPS in Oregon is voluntary to alleviate privacy concerns, though a voluntary system can only work in parallel with a gas tax, which is not a permanent solution. Look to Your Summons to Determine Code Section. %%EOF 31, 2020. https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. Virginias highway use fee went into effect July 1, 2020. At the federal level, the Highway Trust Fund is projected to run out of money by the end of next year. [33] Another option may be to install systems at gas stations and in vehicles that communicate VMT information when filling the tank. However, it seems JavaScript is either disabled or not supported by your browser. The investments support Virginias economic recovery and transform transportation solutions for generations to come.. According to the CBO, returns on private investment will be twice as large as federal investments. WebThe Virginia Department of Transportation (VDOT) is responsible, under 56-468.1, for calculating the monthly fee per access line and reporting it to all affected localities and For fuel-efficient vehicles, the fee is calculated to reflect the 85 percent of the difference between motor fuel taxes paid on the fuel-efficient vehicle and motor fuel taxes paid by a vehicle driving 23.7 MPG.[34]. Lower oil prices from the mid-1980s to mid-2000s increased the sale of SUVs, which are heavier than sedans, resulting in increased road damage. The Virginia Department of Transportation (VDOT) recently broke ground on the I-95 Southbound Auxiliary Lane project, intended to help ease a notorious bottleneck on the freeway near Occoquan, Virginia. [40]United States v. Jones, 565 U.S. 400 (2012), https://supreme.justia.com/cases/federal/us/565/400/. The rate is slightly higher to reflect the fact that diesel-powered vehicles are often larger and thus responsible for more road damage than gasoline-powered vehicles. [2] With the current funding program, the Fixing Americas Surface Transportation Act (FAST Act), expiring this year, Congress must decide how to pay for the Highway Trust Fund in the years to come. At the federal level, the revenue from motor fuel taxes has not been sufficient to cover transportation expenditures since 2008, and there is no reason to think this development will reverse itself. 0000004009 00000 n The highway use fee is calculated based on the gas tax rate at time of vehicle registration and average VMT in Virginia. Vehicle registrations that expire in March, April, and May are also extended for 90 days. The average tax rate is the total tax paid divided by taxable income. Table 2 is an example of how differentiation of rates could look based on mileage information from 2018. u4$4: m+1l#`\"Y`daAx339#}8{4'+_@ * 0000007243 00000 n Figure 7 is a graph showing the MPG by vehicle type by year that illustrates the big jump in the late 1970s. There has sometimes been resistance to taxes on EVs on the grounds that they are environmentally preferable to traditional gas-powered vehicles and thus create fewer externalities. 31, 2020. https://taxfoundation.org/gas-tax-revenue-decline-as-traffic-drops/. [1] Today, a combination of increased fuel economy, growth in sales of electric vehicles (EVs), and inflation has raised questions about the sustainability of these taxes as a funding mechanism for the transportation system of the future. The picture is slightly different when looking at federal tax collections, where rates have held constant in recent years. Internal combustion engines can be loud and dirty, and a motor fuel tax aims to offset their cost to society. [23] Ulrik Boesen, Gas Tax Revenue to Decline as Traffic Drops 38 Percent, Tax Foundation, Mar. %PDF-1.4 % The Department of Motor Vehicles (DMV) said because of the trends, the General Assembly came up with the highway use fee in 2020. 0000039786 00000 n It remains highly unlikely that a federal VMT tax could be implemented as a replacement to the motor fuel taxes so soon. WebThe annual highway use fee will be updated yearly on July 1. [45] According to the CBO, a 1-cent increase in the gas tax increases revenue by $1.5 billion over 10 years. endstream endobj 868 0 obj <>/Metadata 26 0 R/Pages 25 0 R/StructTreeRoot 28 0 R/Type/Catalog/ViewerPreferences<>>> endobj 869 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 0/TrimBox[0.0 0.0 612.0 792.0]/Type/Page/PieceInfo>/PageTransformationMatrixList<0[1.0 0.0 0.0 1.0 0.0 -396.0]>>/PageUIDList<0 1329>>/PageWidthList<0 612.0>>>>>>>> endobj 870 0 obj [/Indexed/DeviceRGB 255 892 0 R] endobj 871 0 obj <> endobj 872 0 obj <> endobj 873 0 obj <>stream A lot of people envision that it would take the place of the gas tax.. In the U.S., commercial vehicles are often tracked as their diesel tax payments are distributed among the states that trucks drive through. On the contrary, it is likely to get worse, driven by technological advances and regulation like theCorporate Average Fuel Economy (CAFE) standards.