What is a Mileage Tax and the Vehicle Mileage Tax Program, Explained

On June 24, 2021, President Biden announced a $1.2 trillion dollar “Bipartisan Infrastructure Framework” as part of his “Build Back Better vision” notes a White House press release on the matter.  As of September 30, 2021, the vote on the Infrastructure Bill was delayed. Part of the package includes proposing a vehicle mileage tax pilot program. Read on to learn what you need to know about vehicle mileage tax.

Everything You Need to Know About Vehicle Mileage Tax | Metromile

What is a mileage tax?

Mileage tax is a type of tax that is paid by the driver based on miles driven. You can think of it as a pay-per-mile tax that subsidizes government programs and can be thought of as a “road user charge”. The vehicle mileage tax is typically based on how many miles you drive in a particular time frame, like a year or quarter. 

What is the vehicle mileage tax program? 

Currently, there is talk on social media about the vehicle mileage tax program. Users are expressing concerns about the cost of driving and incorrectly stating that it would cost drivers 8 cents a mile, per a USA Today story. 

In reality, the vehicle mileage tax program that is included in the infrastructure bill proposes a three-year pilot program to study the viability of a road user charge. The program would begin in 2022 and after the three-year period is up, it may be voted into law by Congress. 

How does the pay-per-mile vehicle mileage tax program work? 

According to the “Infrastructure Investment and Jobs Act” document:

“The Secretary shall establish a program to test the feasibility of a road usage fee and other user-based alternative revenue mechanisms (referred to in this section as “user-based 

alternative revenue mechanisms”) to help maintain the long-term solvency of the Highway Trust Fund, through pilot projects at the State, local, and regional level.”

The program is designed to test out alternative revenue streams that are user-based, conduct outreach as well as education about these programs, assess their acceptance in the community as well as address privacy concerns about getting tracked by the mile, and more. 

There are national as well as state programs that will try out the per-mile user fees. Given that it’s a pilot program and not established into law, it requires passenger and commercial drivers’ participation. 

Volunteers from all 50 states will be solicited to participate in this program. Various telematics devices will be used such as on-board diagnostic devices, smartphone apps, and more. 

These devices will track the miles driven within a specific time period. Volunteers as part of the vehicle mileage tax pilot program will pay per-mile taxes based on the amount of miles driven, within a particular quarter of the calendar year. 

Is the per-mile mileage tax replacing the gas tax?

You might wonder if the per-mile vehicle mileage tax will replace the gas tax also known as the Motor Fuel Tax (MFT). Unfortunately, it’s not clear. 

For some background, the National Conference of State Legislatures (NCSL) website notes that since the early 2000s many states have been trying to come up with solutions to replace MFT. 

Based on data from the National Association of State Budget Officers’ 2019 State Expenditure Report, motor fuel taxes are the largest transportation source of revenue coming in at 39.8%.

Seeing as many states are making moves to reduce emissions and make vehicles less reliant on fuel with the boom of electric cars, there are ideas floating around about how to navigate this going forward, which is one reason the per-mile tax or road user charge is coming into conversation. These can also be referred to as “Vehicle Miles Traveled” (VMT) or “Mileage-Based User Fees” (MBUF). 

There are already some states that are trying out regional pilot programs but the infrastructure bill is bringing it to a national and statewide level. 

Which states are included in the vehicle mileage tax pilot program? 

The National Motor Vehicle Per-Mile User Fee Pilot Program is not in effect as of yet, but if it moves forward it intends to attract volunteers from all 50 states. It will include passenger and commercial vehicle drivers as well. 

Although the program intends to attract drivers from various geographic locations and all 50 states, it is a pilot program where you must volunteer and opt into. 

According to a Washington Post article on vehicle mileage tax, Oregon and Utah are already launching per-mile programs. A more recent posting on the National Conference of State Legislatures (NCSL) website notes that there are 14 state and regional pilots that have received federal grants to implement these programs.

Expect more states to get on board with road user charges (RUC). An earlier blog from NCSL stated:

“State legislatures continue to debate RUC legislation. In 2019 and 2020, at least 19 states—Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Texas, Utah, Vermont, Virginia and Washington—considered 34 pieces of legislation addressing RUC. Of those, at least seven states—Maine, Nevada, New Mexico, Oregon, Utah, Virginia and Washington—have enacted eight pieces of legislation. Five states—Illinois, Massachusetts, Michigan, New York and Vermont—currently have seven pending pieces of legislation, including carryover bills from 2019.”

The bottom line 

The new vehicle mileage tax pilot program is in the infrastructure bill and could be in place in 2022 as part of the pilot program lasting three years. It won’t necessarily affect you until then unless you opt into the pilot program. However, it’s something to monitor and be aware of as many states are looking for alternatives to Motor Fuel Tax. 

If you want to save money based on how much (or how little) you drive, consider pay-per-mile auto insurance that offers you a car insurance premium based on an affordable base rate plus the miles you actually drive. Get a free quote today. 

Melanie Lockert is a freelance writer, podcast host of the Mental Health and Wealth show, and author of Dear Debt. She’s a cat mom to two jazzy cats, Miles and Thelonious, an amateur boxer, music lover, and needs coffee to function.