Federal road financing has always been paid for by drivers. Because fossil fuels — gasoline or diesel — powered all cars when our road system was created, the federal government and many states decided that the user fee drivers would pay would come from a per-gallon fuel tax. Only drivers paid this tax, and it was easier and cheaper to collect than tolls.
Today, however, policymakers are pushing drivers away from fossil-fuel-operated vehicles. Gas-electric hybrids such as Toyota’s Prius dramatically increase gas mileage, so drivers pay less per mile for their roads even as they cause the same damage. All-electric vehicles, such as Tesla’s models, have no internal-combusion engine at all, meaning drivers of pricey electric cars pay nothing for the roads they drive on, beyond the occasional toll.
That is unfair for two reasons. If roads should be paid for by drivers, then all drivers should pay for roads. People who drive all-electric vehicles get a free lunch while people who drive hybrids get a subsidized meal. Moreover, those cars are more expensive than their gas-fueled cousins, meaning that the people who drive them are likely more able to pay for roads anyway. Democrats like to paint Republicans as wanting to subsidize the rich, but letting Tesla owners drive for free is the ultimate giveaway.
Conservatives have long promoted market-driven solutions to public problems. Modern conservatives are also resistant to higher taxes, even when they pay for services average people want and need, such as roads. Anti-tax activist Grover Norquist has already come out against any increase in the 18.4-cent-per-gallon federal gas tax to pay for the new infrastructure bill, probably complicating the politics of getting anything through Congress.
A creative proposal to completely move away from gas taxes altogether could satisfy conservative principles, anti-tax activists and Democrats — so long as they are willing to tax Teslas.
Such an approach would replace gas taxes with a two-tiered financing system. Tier one would be a federal mileage-based user fee. The owner of any vehicle would have to pay per mile driven rather than per gallon of fuel consumed. This would force Tesla and Prius owners to pay full price for the roads they use. It would also be market-driven, as it would present every driver with a clear choice: Drive more, pay more; drive less, pay less.
Rural and low-income drivers would be hit hard by this idea, so it would have to come with a generous mileage exemption that would give owners who drive vehicles for their personal use a certain number of free miles they could drive each year without charge. That would be a large tax cut for those drivers and help significantly to offset any increase they might have to pay as a result of the per-mile charge. It would also address key constituencies in each part — rural voters for the GOP and low-income drivers for Democrats.
Modern technology also means the fee could be efficiently collected. Drivers of fossil-fueled cars or hybrids could be required to input their license plate and mileage every time they fuel up, allowing a per-mile tax to be added at the pump. We already input our Zip codes at the pump if we use credit cards in many regions, so this would be simply a matter of upgrading technology. Drivers of all-electric vehicles could be required to pay quarterly bills online, recording their plates and mileage and paying with a credit card or bank account on file. Any cheaters would be caught when they bring their cars in for annual safety inspections or smog checks, when a neutral party independently would check mileage.
Tier two would be a federal per-vehicle fee that charges owners according to the value of their vehicles. This would also come with a generous exemption for cars driven for personal use, say, $15,000 per vehicle, so that the burden would fall where it should: on the affluent. This would introduce a progressive element to road financing, something Democrats should support.
The United States needs to upgrade its infrastructure, and ordinary Americans who have faced stagnating incomes for years don’t need a tax hike. These ideas would let us meet both needs at once. They would use conservative approaches such as user fees and per-mile pricing, and progressive values that say the rich and affluent should bear greater social burdens. They would also prepare us for the day not so far in the future when hybrids or all-electric vehicles will dominate.
Schumer surely thinks he’s got Trump in a political box by making him come up with the taxes to pay for the spending. Trump should turn the tables on him, propose these ideas and watch him squirm.