Mileage-Based User Fee Winners and Losers - RAND Corporation

expanded and that a vehicle mileage-based user fee (MBUF) should be considered. In particular, the
dissenting group writes:
“Thanks to technology development and the leadership of a number of State and
local officials, the move toward direct pricing is underway at the State and local
level. A change from an indirect to a direct pricing system can and should ensure
continued access to transportation systems for all Americans, regardless of income.
In fact, when contrasted to the highly regressive nature of higher fuel taxes and
congestion itself, direct pricing is likely to be a far more fair system” (National
Surface Transportation Policy and Revenue Study Commission 2007, 67). 6
The majority of the Policy Commission recommended that the next transportation authorization bill
fund “a major national study to develop the specific mechanisms and strategies for transitioning to
an [MBUF] alternative to the fuel tax to fund surface transportation programs” (National Surface
Transportation Policy and Revenue Study Commission 2007, 53).
Section 11142 of SAFETEA–LU established the 15 member National Surface
Transportation Infrastructure Financing Commission (2009). The “Financing Commission”
reported their unanimous findings to Congress, the Department of Transportation, and the
Department of the Treasury in 2009. While the work of this commission overlaps considerably with
the work of the Policy Commission, the focus of their study is “on how revenues should be raised,
including whether there are other mechanisms or funds that could augment the current means for
funding and financing highway and transit infrastructure” (National Surface Transportation
Infrastructure Financing Commission 2009, 5). The Financing Commission’s findings echo the
findings and recommendations of the two prior study groups; the current system of indirectly
taxing travel by taxing users’ fuel consumption is unsustainable over the long-term and the system
must transition to direct charges on VMT (National Surface Transportation Infrastructure Financing
Commission 2009, 7-16).
It is remarkable that these three disparate groups agree on the need to replace the gasoline
tax with an MBUF despite conflicting conclusions regarding when the fuel tax will no longer be
viable, how much funding is ultimately needed, the role of the federal government in transportation
relative to the states, the types of transportation projects that should be funded by the federal
government, and how these investments should be prioritized. This reflects or, perhaps, is
motivating a growing consensus among senior transportation policy experts and advisors that
transportation will be primarily funded by direct user charges instead of gasoline taxes (Forkenbrock
and Hanley 2006; Shane et al. 2010). While there is consensus regarding the general concept and the
need for a vehicle mileage-based tax or user fee, there remains considerable disagreement about the
technical details, timeline, costs, benefits, system impacts, and social effects of MBUFs. 7
6 The term “regressive” means that the tax burden falls more heavily on low income taxpayers than on high income taxpayers relative
to their ability to pay. It is the opposite of a “progressive” tax such as the federal income tax.
7 A tax on VMT is commonly referred to as a “Mileage-Based User Fee” or a “VMT fee.” The use of the term “fee” may be a
conscious, intentional semantic choice by those advocating for the adoption of one. Following conventional usage, the term
“MBUF” will be used though out the dissertation but it is always treated as a tax. The distinction between a user fee and a tax is
important although there remains some disagreement over the intent and the precise legal definition of a “user fee.” In general, the
revenue from a tax can be used for any purpose while the revenue from a user fee may only be used to provide the public good or
service on which the fee is being charged (Gillette and Hopkins 1987). There are often further distinctions between the ease to levy
and change the rate of a tax (difficult) and a user fee (relatively easy).
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