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CBO backs off plan to tax cars by the mile

120916 CBO backs off VMT tax
CBO detailed how raising the gas tax might be a better way to boost federal highway funding. (Brian Davies/The Register-Guard)

The Congressional Budget Office this week backed away from the idea of taxing cars based on how far they drive in order to boost federal highway taxes, after initially saying the idea is one that could be explored.

The federal government has been wrestling for years with how to find new money for federal highway projects, since the 18.4 cent tax on gasoline isn't bringing in as much as the government plans to spend. Most estimates say the Highway Trust Fund will be out of money sometime in the next decade given the current pace of taxing and spending.

The Obama administration and others have floated the idea of imposing a tax on vehicle miles traveled tax, or a VMT tax, which would charge people based on how far they drive. And in 2011, CBO put out a report that said this was a "practical" option in light of new technology that makes it easier to track cars and pay bills electronically.

"Now, electronic metering and billing are making per-mile charges a practical option," CBO wrote then.

But CBO backed away from the idea in a Thursday report detailing how raising the gas tax might be a better way to boost federal highway funding.

In its new report, CBO noted past arguments that a VMT tax might be more "economically efficient," and might be a better tool to find funding for repairing damaged roads. But CBO then warned that implementing a VMT tax would be "much more complex" that just raising the gas tax, a sign it has given up on the idea.

"[C]reating the systems necessary to administer a tax on the number of vehicle miles traveled would be much more complex than increasing the existing excise taxes on fuels," it said.

CBO didn't list those complexities, but opponents of a VMT tax have argued it would require tracking devices to be placed in everyone's car and truck in order to determine how far they have traveled. Many have argued this technology could raise privacy questions, since it would create an electronic paper trail on just how far people are driving.

In 2011, the Obama administration's Department of Transportation drafted proposed legislation that imagined all gas stations would be equipped with technology to read how far people's cars have driven electronically, which would then generate a tax bill that would be sent to car owners.

CBO's comments on a fuel tax were part of a set of 115 recommendations it made to reduce the deficit. CBO said increasing fuel taxes by 35 cents per gallon at the federal level would raise $474 billion over the next decade.