With a $1.9 trillion dollar stimulus package under its belt, the Biden administration is now moving onto its next major spending package: a $2.25 trillion infrastructure plan to give America's woefully underfunded transportation networks a much-needed overhaul.
With roads and bridges across the U.S. in a state of disrepair, there is widespread agreement that some kind of investment is necessary, but how to pay for it has been a topic of debate.
While the coronavirus pandemic pushed both Democrats and Republicans to embrace an uneasy bipartisan consensus that high levels of deficit spending were required to fend off economic disaster, pre-COVID budget politics are already rearing their head.
Secretary of Transportation Pete Buttigieg made headlines last Friday when he told CNBC that new taxes were on the table to fund the package. Specifically, he endorsed a vehicle miles traveled tax (VMT), which can take various forms but generally charge drivers a fee based on the number of miles they travel. The concept is often proposed as an alternative to the gas tax.
“I’m hearing a lot of appetite to make sure that there are sustainable funding streams,” he said.
The transportation secretary has since walked back his comments, telling CNN on Monday that a user-based mileage fee or an increase in the gas tax were “not part of the conversation about this infrastructure bill."
Instead the administration announced Wednesday that it's raising $2 trillion in new corporate taxes to pay for the first part of the bill. The back-and-forth nonetheless provides a window into the internal tensions that might come with federal government spending post-pandemic.
'A Money-Losing Proposition'
The backlash among progressive Democrats to a possible vehicle miles traveled tax that followed Buttigieg's comments provides a window into that emerging debate.
"This is no way to fund infrastructure on the backs of the working poor," Nina Turner, a former Ohio state senator and co-chair of Sen. Bernie Sanders’s 2020 presidential campaign.
Turner's opposition to VMT reflects a common opinion among progressive Democrats that any user-based mileage fee would be regressive because poor and working people who have long commutes or live in sprawling rural areas would be unduly burdened.
"The gas tax is regressive," Turner said. "The tax that Secretary Buttigieg was proposing is regressive. We need to take a step back from time to time and center the people who have the greatest need."
Those who support a mileage-based fee argue that something has to replace the gas tax, which has long been unable to meet the country's infrastructure needs.
"I think everybody's realizing that gas taxes aren't going to work, especially if you have ambitions to massively increase the electric car fleet," said Randal O'Toole, a senior fellow for the right-wing Cato Institute."It's a money-losing proposition in the long run because cars are getting more fuel-efficient, whether they're electric or petroleum-powered."
The federal government long relied on the gas tax to pay for road repairs, but Congress has since broken that tradition, transferring at least $143.6 billion in largely general funds to the Highway Trust Fund between 2008 and 2020, according to the Congressional Budget Office.
In addition to increased fuel efficiency and growing repair costs, another reason for the shortfall is that Congress hasn't upped the 18.4-cents-per-gallon federal gasoline tax since 1993. Increasing the rate or indexing it for inflation is one solution, but this has proven a political non-starter for nearly three decades.
Supporters argue that a VMT would offer a workaround that is also prepared for a future dominated by electric cars. Indeed, the states that have introduced mileage-based user fees, such as Utah and Oregon, are trying to target electric-vehicle owners as a way to make them pay their fair share or face increased vehicle registration fees.
Critics, however, point out that electric vehicles are still a long way from replacing gas-powered cars — with a number of estimates placing their market share at around 3 percent.
"I'm a bit of a VMT skeptic at this point," said Daniel Trubman, an organizer for 5th Square, a Philadelphia-based political action committee focused on transportation issues. "I think the basic idea for a VMT is that if you're financing highway projects with the gas tax and everyone switches over to electric vehicles, you're not going to be raising as much revenue. That may be true in the future, but it's not a particular issue right now. Electric vehicles are still a tiny share of the market for cars and zero-percent of the share for trucks."
'The User Pays Principle'
Trubman noted, however, that some kind of mileage-based fee is inevitable in the long-run as electric vehicles become more dominant, though not necessarily for the purpose of raising needed revenue.
"At a time where the federal government can borrow money practically for free, it seems a little disingenuous to worry about debts," he said. "There may be other reasons to raise taxes, from an equity standpoint or to discourage driving, but they shouldn't allow revenue concerns to prevent building necessary infrastructure."
This sentiment echoes the perspective of the growing movement around Modern Monetary Theory, which contends that federal governments that print their own currency can spend whatever they want and use taxes to control inflation rather than raise needed revenues.
MMT champion and populizer Stephanie Kelton, author of The Deficit Myth, made her feelings clear about using a mileage-based tax to pay for an infrastructure bill in a recent tweet:
As Buttigieg said before the House Transportation and Infrastructure Committee last Thursday, what's at stake here is that long-held belief among policymakers that individual users should pay for their use of infrastructure, whether through a gas tax or VMT. "We’re obviously going to need to come to more solutions if we want to preserve that user-paid principle," he said.
MMT believers and progressive Democrats reject this approach to government spending.
Joe Sanberg, co-founder of Aspiration, an online banking and investment firm, who briefed Biden's transition team on labor and economic issues, compared government spending on infrastructure to regular household accounting practices, in which assets cancel out debt.
"If you borrow a million dollars to buy a million-dollar home, you don't have debt because your asset cancels out your debt," he said. "We need to apply that really basic logic to understanding how the government can build infrastructure."
He added the Biden administration should utilize its ability to tap the U.S. treasury markets to come up with the needed money to break the pattern of underinvestment in infrastructure.
This type of thinking doesn't foreclose on new taxes, however, but those taxes should have other goals outside of raising revenue, said Turner, such as taking a fair share from the wealthy.
She stressed that the Democratic party needs to break this pattern of underinvestment if they're going to stop voters from becoming even more jaded with the political process.
"I think Democrats need to go big," said Turner, who is running for Congress in a special election set for next November. "We have two good years. We don't know what's going to happen in the election of 2022, but what we do know is that we have the power right now and we should leverage that power to do the greatest good for the American people."