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Uncle Sam Considers Taxing Motorists for Miles Driven

Vehicles pass through a California Departement of Transportation chain inspection stop on eastbound Interstate 80 near Alta, Calif., Thursday March 24, 2011. (AP)AP2011

As if fuel taxes and rising gas prices weren't causing enough pain at the pump, Democrats seeking to raise new revenues to support federal spending on highway maintenance are considering taxing motorists for the number of miles they drive.

The Congressional Budget Office lent credence to the idea in a detailed report released this week, saying that taxes on vehicle-miles traveled -- or VMT taxes -- would be a fair way to charge motorists for the real cost of using the nation's highways and would encourage more efficient use of the highways than fuel taxes.

"Judging from estimates of the costs of highway use, a system that charged for all such costs would have most if not all motorists paying substantially more than they do now -- perhaps several times more," the report said. "Such a system would maximize the efficiency of highway use by discouraging trips for which costs exceed benefits."

The report said VMT taxes "would create incentives for people to limit highway use to trips for which the benefits exceed the costs, thus reducing or eliminating overuse of highways and helping identify the economic value of investments in highways."

But the report also said challenges remain in trying to implement a system that included installing metering equipment in all of the nation's vehicles.

"Having the devices installed as original equipment under a mandate to vehicle manufacturers would be relatively inexpensive but could lead to a long transition; requiring vehicles to be retrofitted with the devices could be faster but much more costly, and the equipment could be more susceptible to tampering than factory-installed equipment might be."

Not everyone, however, supports VMT taxes.

"It's outrageous," said David Selig, a federal tax practitioner. "Right now because the economy of so many people who have to drive a long way to work for less money and now, because of this ridiculous proposal, they're actually going to bring home less money than ever before. Moreover, you have no reason to believe the government is actually going to use this money to repair the highways."

The CBO issued the report at the request of Sen. Kent Conrad, chairman of the Senate Budget Committee, who held a hearing on transportation funding earlier this month.

The Obama administration wants to spend $556 billion over the next six years, with $468 billion of that going to federal transportation improvement projects.

Conrad noted that the fuel tax won't be enough to cover the federal deficit in highway spending. By 2021, he said, the gap is projected to be $18 billion a year.

"We have a very big problem here to deal with and we know that the reality of trust fund financing is based on the gasoline tax," Conrad said. "The gasoline tax is more and more disconnected from the reality of modern transportation, with electric cars, with hybrids, with renewable fuels, with all of the rest that is happening to change the way we transit. We've got a big problem here between the need and the funding mechanism."

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