Push for infrastructure gas-tax hike loses steam

Longtime proponents of raising the gas tax and recent converts to a vehicle miles traveled tax are sensing it’s increasingly unlikely that either revenue-raiser will be a part of President Biden’s massive infrastructure proposal.

Administration officials have indicated they would rather raise the corporate tax rate to pay for the $2.3 trillion package — allowing Biden to keep his pledge on not raising taxes for people making less than $400,000 — and key Senate Republicans say there’s no interest in their caucus to pursue the first gas tax increase since 1993.

The developments come even as experts say now would be the perfect time to impose a vehicle miles traveled (VMT) tax, one of the few areas of bipartisanship when it comes to raising taxes, since more electric vehicles are on the road each year.

“It is an improvement over a traditional gas tax because it better reflects the wear-and-tear vehicles place on roads, rather than on the amount of gasoline they consume,” said Howard Gleckman, a senior fellow at the Urban Institute.

“Despite these advantages, neither a gas tax hike nor a VMT is likely to pass Congress since both violate President Biden’s pledge to not raise taxes on households making $400,000 or less.”

Still, the issue may very well be raised by lawmakers when Biden’s proposal starts making its way through committees on Capitol Hill.

House Transportation Committee Chairman Peter DeFazio (D-Ore.) has been supportive of exploring a VMT tax but said he would prefer implementation on a smaller scale in the form of pilot programs before making it universal.

“We still must learn more from these tests — including how to address privacy concerns and how revenue gets collected — before taking additional steps at the federal level,” he told The Hill in a statement.

A tax on miles traveled has support on the Republican side as well.

Rep. Sam Graves (R-Mo.), who as ranking member of the Transportation Committee has called for a national VMT program for years, said last week he would support working with Congress and stakeholders to create a national pilot program if privacy issues are properly addressed and it did not create an undue burden on rural drivers.

A spokesperson for Graves later added that the Missouri Republican “supports entirely eliminating the fuel taxes and switching over to a VMT. That’s an important step we need to take regardless, and he is willing to work across the aisle on this issue.”

Unlike the gas tax, a VMT tax levies a fee based on miles traveled rather than simply the amount of gas used. The federal gas tax has stood at 18.4 cents per gallon since 1993.

Some lawmakers say a VMT tax is a long-term solution whose time is not here yet. Senate Environment and Public Works Committee Chairman Tom Carper (D-Del.) told The Hill in a statement that such a fee “is the future, but we aren’t ready to implement a vehicle miles traveled system on a national level today.”

“Regardless of whether you’re driving a gasoline- or diesel-powered vehicle or an electric-powered vehicle, hydrogen-powered vehicle, you’re going to pay directly or indirectly for the construction of our roads, highways and bridges. That’s the future. That may be 10 years away,” Carper said April 14 at a virtual event hosted by The Hill.

Carper last week also expressed openness to a gas tax hike, asking IRS Commissioner Charles Rettig during a Senate Finance Committee hearing if a rebate for lower- and middle-class households would be possible in the event of an increase.

“I don’t expect you to do this on the fly, but I want you to talk to your folks about it,” Carper said, adding that he was exploring possible revenue sources for Biden’s infrastructure bill that wouldn’t violate the president’s pledge on not raising taxes for most Americans.

Sen. Bernie Sanders (I-Vt.), speaking to reporters Wednesday on Capitol Hill, said a gas tax hike rather than increasing taxes on corporations would only add to “the effective tax rate for working people [being] higher than it is for billionaires.”

“I think the American people understand that the wealthy and large corporations have got to start paying their fair share,” Sanders added. “If we want to rebuild our crumbling infrastructure, we need money, and that’s an expensive proposition, and that’s the fair way to get it.”

Sen. Joe Manchin (D-W.Va.) was more blunt on the question of gas taxes, telling reporters: “Oh, hell no. Don’t raise them.”

Business groups like the U.S. Chamber of Commerce that oppose funding infrastructure with a corporate tax hike are some of the biggest supporters of a gas or mileage tax to finance Biden’s proposal.

“We at the Chamber have been calling for adjusting [the gas tax] for the last 10 years, because it’s lost about 10 percent of purchasing power due to inflation,” said Ed Mortimer, vice president of transportation and infrastructure at the Chamber of Commerce. “A gasoline tax is going to be a depleting source of revenue — we think we need to explore transitioning down the road to a VMT.”

Potentially complicating Republican support for a VMT tax is the number of GOP lawmakers, including Graves, who have signed the Americans for Tax Reform’s pledge not to raise taxes. The group, led by anti-tax crusader Grover Norquist, said it is opposed to both a gas tax increase and a new VMT tax.

“Americans for Tax Reform and the taxpayer movement are strongly opposed to adding an additional tax on the backs of American households. Voters will recognize this is a tax increase,” a spokesperson said.

If the infrastructure package proceeds without a gas or mileage tax, experts say that’s likely to put even more pressure on transportation funding mechanisms down the line.

“I think what’s happened is now that there’s an interest from the administration in increasing the amount of money spent on transportation, the question of how we pay for it becomes that much more pressing,” said Asha Weinstein Agrawal, director of Education at the Mineta Transportation Institute.

She said the lack of increase in the gas tax, combined with more electric vehicles, made a mileage tax an increasingly attractive option from a policy perspective.

“People are willing to start thinking about some kind of conceptual replacement [for the gas tax] that relates to how much they use the roads, and the mileage fee is the opportunity that’s been discussed most widely in the last decade.”

Jordain Carney and Alexander Bolton contributed.