If there’s one thing we’ve learned from the Legislature’s recent study committee hearings, it’s that broad changes to Georgia’s tax code may be on the horizon. In fact, the Joint Study Committee on the Electrification of Transportation has been focused, in part, on updating the Peach State's tax policy to deal with the emerging electric vehicle market, which could impact the majority of Georgians.
One of the committee’s recurring themes has been the need to adopt some form of the Vehicle Miles Traveled (VMT) tax in order to continue funding transportation infrastructure, including roads and bridges, which we all appreciate. Getting the VMT tax right will be challenging, and the proposals promise to be contentious and confusing.
By way of background, Georgia levies a 29.1 cent per gallon excise tax on gasoline, although this tax has been suspended for months. Gov. Brian Kemp used his emergency powers to temporarily halt its collection as the state grapples with high gas prices and supply chain issues. Rest assured, the tax will soon return.
The gas tax funds a large portion of Georgia’s transportation needs, but as cars get more fuel efficient and more Georgians buy electric vehicles, the state will collect less and less transportation funding. This poses problems for Georgia’s future and, if not addressed, could result in an underfunded transportation system—greatly impacting many facets of everyday life and our economy.
To account for this phenomenon, some have looked at the VMT tax as a potential remedy, which in theory could work. Such a paradigm would impose a tax based on the number of miles Georgians drive, but it’s not clear how this tax regime would work in Georgia.
As my friends at the Georgia Public Policy Foundation (GPPF) suggested it’s possible that drivers would report their miles driven annually when they renew their tags or rely on an automatic reporting device, like a GPS tracker. However, the latter poses some legitimate privacy concerns: Would the government know where you were at all times? How could the tracking information be used against you? Rep. Clay Pirkle, R-Ashburn, even raised this issue in study committee. In whatever method legislators might choose, Georgians would multiply the miles traveled by the state tax rate, and that would be your tax bill.
The VMT tax is an attractive option, given that it isn’t a blanket flat tax on all Georgians, but rather a targeted tax based on how much drivers use roads. Nevertheless, implementing such a model fairly will take some special considerations.
For starters, policymakers will have to get creative to determine how to capture the miles driven by semi-trucks that regularly pass through Georgia and how to deduct the miles Georgia drivers log when they are out-of-state without violating their privacy. It would be unfair to expect them to be taxed on out-of-state travel and to give those driving through the state a free pass.
While a consumption tax based on mileage may in theory seem fair on its face, there’s more to it than that. Vehicle miles traveled, road maintenance, and environmental factors play into the normal wear and tear of roads, but so does vehicle weight—particularly the weight of large trucks—and how that weight is distributed per axle. That’s why highways have weigh stations.
“The amount of infrastructure damage an overweight vehicle causes is geometrically larger than the weight increase; for example, an increase in axle weight from 18,000 pounds to 20,000 pounds causes 50 percent more damage to the pavement,” according to the Federal Highway Administration. As such, if lawmakers ultimately pursue the VMT tax, any proposal should factor in weight in addition to miles driven into a transportation tax rate.
Moreover, the tax shouldn’t be viewed as a revenue generator in addition to the current gas tax. In order to continue to maintain Georgia’s low-tax status and pro-business environment, the VMT tax should be designed to be revenue neutral and ought to replace the gas tax altogether—as GPPF suggested. That would prevent the government from double-dipping by charging drivers of combustion engines the VMT tax and the gasoline excise tax, which would be incredibly burdensome.
It may be a number of years before Georgia lawmakers seriously consider a VMT tax. If they were to look at it now, they’d be confronted with a host of practical issues that they’d need to address, but there’s hope that it could work in Georgia. After all, there are VMT tax programs in Oregon and Utah, but it might be wise for Georgia to patiently wait for other states to perfect it before accelerating down that route.
Marc Hyden is the director of state government affairs at the R Street Institute. You can follow him on Twitter at @marc_hyden.