On MSNBC Wednesday night, after discussing infrastructure with Republican congressional leaders earlier in the day, President Joe Biden shared his legislative strategy. “I want to get a bipartisan deal…[and] that means roads, bridges, broadband, all infrastructure.” Regarding what they can’t agree on—which presumably would include less traditional forms of infrastructure—Biden said he’s prepared to “fight over what’s left and see if I can get it done without Republicans, if need be.”
Seems easy enough. Senate Minority Leader Mitch McConnell has already said he’s willing to support upwards of $800 billion in physical infrastructure. While Democrats would like to spend more and include items not typically considered infrastructure, Biden and his congressional allies have no complaint about spending hundreds of billions on traditional infrastructure.
The two parties are not debating whether the government should play a major role when building traditional infrastructure. They’re only haggling over cost.
So, what’s the hold up? How to pay the cost. This debate is philosophical.
Republicans have argued infrastructure funding should be based on a “user-pays” principle. The more you use the infrastructure, the more you should pay. Democrats have effectively insisted on a progressive “wealthy-pays-more” principle, no different than their view of how government in general should be funded. The two principles do not have overlap, though a compromise could involve elements from each view, with some revenue from user fees and some revenue from higher corporate taxes.
The question for Biden and the Democrats is: Should they bend on their wealthy-pays-more principle to get an activist government?
The Republican position is tied to precedent. The Highway Trust Fund—created in 1956 to provide stable financing for the new national highway system, then later expanded to cover different transportation projects—was established on the user-pays principle. The fund relied on revenue from taxes on fuel, trucks, buses, and tires. The more you drove the more you paid.
However, neglect has partially eroded the user-pays principle since 2008. The gas tax is not pegged to inflation, captures less revenue from hybrid cars, and doesn’t capture any revenue from electric cars. These days the gas tax doesn’t even keep the trust fund solvent. Washington must dip into the general fund to keep that exit ramp from crumbling
The Republican response to this shortfall is to shore up the user-pays principle with, in the words of lead Republican negotiator Sen. Shelley Moore Capito of West Virginia, “extending user fees to owners of electric vehicles.” Presumably, this would involve a “vehicle mileage tax,” for which drivers of all cars would pay based on the distance they drive. This way you can start to capture revenue from all those electric vehicles that are on the road—a number that will soar now that all the automakers are turning electric like Bob Dylan in 1965. (GM ads now feature Malcolm Gladwell cheering on the new era.) Could, or should, a vehicle mileage tax be part of a bipartisan deal?
While Democrats have never been enthusiastic champions of the user-pays principle, they never quashed it when they could have. The handful of gas tax increases over the past several decades have been bipartisan. And some Democrats acknowledge that a vehicle mileage tax is inevitable in an electric era.
Back in 2014, the Democratic-aligned think tank Center for American Progress published an issue brief which argued, “Dramatic improvements in vehicle fuel efficiency have eroded the long-term viability of the gas tax as a primary source of transportation revenue” and in turn, proposed a gas tax hike to “stabilize the [highway]” trust fund and provide transitional revenue to serve as a bridge to an [mileage-based user fee] system.” Congresswoman Pramila Jayapal of Washington and a leading progressive advocated for consideration of a VMT during a 2019 committee hearing, saying, “Everyone understands the gas tax is unsustainable.” Last year, the House Transportation and Infrastructure Committee Chair Peter DeFazio of Oregon told Roll Call, “We are ultimately going to move to VMT.”
Democrats do not have a visceral aversion to VMT on policy grounds. But they do seem terrified by the treacherous political grounds. In March when Transportation Secretary Pete Buttigieg suggested that a VMT “shows a lot of promise,” he and the White House moved fast to assure the public Biden would not propose either a gas tax increase or a VMT.
Biden has already said he would not raise any taxes on people earning less than $400,000 a year. And while a VMT could be defined as a user fee and not a tax (despite the “T” in VMT), Biden is openly concerned that the bottom line matters more than the nomenclature. After meeting with Republican leaders earlier this week, Biden told reporters, “if everything is paid for by a user fee, well, then, you know, the burden falls on working-class folks who are having trouble … This has to be a burden shared across the spectrum.”
Beyond the pocketbook pinch, creating an entirely new revenue raising system for drivers, one that would involve government tracking of personal road use, is bound to generate major blowback. A VMT could also be designed to incentivize behaviors, but people don’t always appreciate being penalized for their current behavior. For example, a higher fee during rush hours could encourage mass transit use and reduce congestion. A 2017 research paper found that a VMT would provide 20 percent more social benefit than a gas tax increase, such as reduced accidents, greenhouse gas emissions, and traffic congestion. But you won’t care about the macro social benefits if you don’t want to swap your car for the bus.
However, so long as Biden needs Republican votes—and if a full 50 Senate Democrats are not willing to move infrastructure through budget reconciliation, he does—he can’t discount Mitch McConnell’s stated “red line”: “We’re not interested in re-opening the 2017 tax bill.” That may not cut off the possibility of some changes to the corporate tax code, but it almost surely precludes the possibility of funding the entirety of any infrastructure package on corporate tax hikes alone.
Fortunately, the Republican user fee offer is not philosophically repellant, just politically dicey. But politics can be managed, perhaps with a gradual transition. As DeFazio said last year, “There’s no way to instantly convert the country to VMT.” DeFazio’s state of Oregon has a voluntary VMT program; perhaps similar pilot projects could be funded to help slowly move the country towards a VMT. If the public isn’t jolted by an abrupt shift in how we pay for infrastructure, and if enough Republican fingerprints are on the final bill, Biden and the Democrats could potentially avoid suffering a political jolt of their own in the midterm elections.
Any compromise that includes higher user fees, with only limited changes to the corporate tax code, may disappoint some Democrats. But the infrastructure bill is not the last chance to enact corporate tax hikes and loophole closures. A corporate tax reform bill can be passed on its own, most likely through a partisan budget reconciliation process, without any link to a spending bill.
A radical revamp of how we pay for infrastructure, touching every driver in America, contains enough political risk to warrant trepidation. Even if some drivers are fine with a government-mandated mileage tracker on their car, others will surely overreact. But as Biden has said, “inaction is simply not an option.” If he needs GOP votes, and Republicans are insistent on higher user fees, Biden may just bite. Sharing political risk may be the only way to fuel the dream of repairing America’s infrastructure.