Will the U.S. Use a Mileage Tax to Pay for the Infrastructure Bill?

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Aug. 5 2021, Published 1:40 p.m. ET

The infrastructure bill awaits a Senate vote on Aug. 7, which marks the furthest the bill has gotten so far. With largely bipartisan support, the chances of it passing are pretty sizable. After all, negotiators have worked hard to produce the 2,702-page document outlying $550 billion in new spending ($1.2 trillion overall). Will a mileage tax help pay for it?

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Not quite. Here are the details of what a mileage tax means, and why President Biden is looking elsewhere for funding.

What is a mileage tax?

Sec. 13002 of the infrastructure bill lays out the national motor vehicle per-mile user fee pilot. A per-mile user fee is a revenue mechanism that the government could apply to road users operating motor vehicles on the surface transportation system. It's "based on the number of vehicle miles traveled by an individual road user," according to the bill.

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The idea of a mileage tax first came from Delaware Senator Tom Carper and West Virginia Senator Shelley Moore Capito (a Democrat and Republican, respectively).

Why Biden doesn't plan to use a mileage tax to help pay for the infrastructure bill

Despite the fact that the current iteration of the infrastructure bill includes details of a mileage tax program, Biden has previously stated that he is totally against using a mileage tax to fund the government spending tied to the bill.

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White House officials say that the mileage tax program is included in the bill simply to open the door to a voluntary pilot program. Also, it satisfies officials like Transportation Secretary Pete Buttigieg and Treasury Secretary Janet Yellen. The government could oppose legislation that attempts to implement the mileage tax on a non-voluntary basis moving forward.

As for the pilot program, the bill suggests that it could implement volunteer drivers to test a variety of "vehicle-miles-traveled collection tools" from automakers, smartphone apps, car insurance companies, state data, fueling stations, and more.

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Volunteers would be compensated from a pool of $10 million, which could be supplemented moving forward.

It's important to note that the bill isn't officially approved yet, and things could change before Biden gives his signature.

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How does the government plan to pay for the bill?

If the mileage tax inclusion in the infrastructure bill is just a formality, what will fund it instead?

U.S. legislators report a number of sources they plan to use to fund the bill:

  • Leftover COVID-19 relief funds amounting to $250 billion

  • Recovered fraudulent unemployment benefits amounting to $50 billion

  • Delaying a Medicare rebate that former President Trump approved worth $50 billion

  • Recovering back taxes on cryptocurrency capital gains and enforcing stricter rules moving forward amounting to an estimated $30 billion

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In addition, the government is banking on long-term returns in the form of increased economic growth resulting from improved infrastructure across the U.S. (which, of course, means adding to the national debt).

Biden dreams of a day when he can recalibrate the U.S. tax code to weigh heavier on wealthy individuals and corporations. Until then, he'll be scraping from sources all over the place—presumably, without a mileage tax.

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