Mileage-Based User Fee Winners and Losers - RAND Corporation

adopt a rate structure that varies by the road being traveled and by the time of day. Variable pricing
could be used to reduce traffic congestion very effectively and is the greatest source of potential
benefit to highway users (Parry, Walls, and Harrington 2007). By managing travel demand more
efficiently and effectively, investment needs could also be minimized (Small and Van Dender 2007).
Adopting a sophisticated MBUF collection system would also allow for an improved understand of
where transportation investments are most urgently needed.
An MBUF collection system that allows for accurately charging users based on exactly where
on the transportation system they have driven also allows for a more accurate spatial understanding
of travel demands. This will enable a more accurate apportionment of revenue to local jurisdictions
and prevent interstate tax evasion. 10 Currently, it is possible to know with certainty only where the
fuel was purchased and not where it is consumed. This more accurate data may also be used to
better calibrate transportation planning models which may lead to improved long-term plans
(Sorensen, Wachs, and Ecola 2010). The potentially high level of detail and accuracy of the data
raises concern for traveler privacy.
There are several concerns about MBUFs which may offset the potential benefits. One of
the first concerns expressed by members of the general public upon hearing about MBUF proposals
is privacy (Baker and Goodin 2011). The technical feasibility studies have demonstrated that user
privacy can be protected (Forkenbrock and Kuhl 2002; Whitty 2007; Sorensen, Wachs, and Ecola
2010). Nonetheless, the perception among the public that MBUF metering systems can be used by
the government to track individuals will likely persist.
Another significant problem with MBUFs is the higher cost of administering, collecting and
enforcing the tax. Fuel taxes are collected indirectly from users at central distribution points and the
total costs are about 1 percent of total revenue (Balducci et al. 2011). With no MBUF system in
operation anywhere in the world, it is not possible to accurately estimate the costs of a state or
national system at this time. The costs of accurately collecting the fee directly from every driver,
enforcing compliance, and managing disputes will undoubtedly be higher than the fuel tax. The
closest analogue to an MBUF, in operation, is a toll road. These require an average of 34 percent of
revenue to operate and collect (Balducci et al. 2011). A full scale MBUF system will likely be more
efficient than a single tolled road, but the costs will clearly be greater than under the current fuel tax.
Adopting an MBUF to support current levels of public funding of transportation will necessarily
require a higher tax rate in order to generate sufficient revenue to offset the increase in collection,
administration, and enforcement costs. Analysts have proposed that benefits from additional
services could help to partially offset the higher costs (Sorensen, Wachs, and Ecola 2010; Baker and
Goodin 2011).
Some of these other potential benefits to drivers from an advanced MBUF collection system
include “pay as you drive” (PAYD) automobile insurance, automated parking and toll payment,
location dependent travel and safety services, and media connectivity services for vehicle passengers
(Sorensen, Wachs, and Ecola 2010). While these possible benefits are promising, more research is
needed to understand whether they are actually feasible and how much drivers will value them. More
research is also needed to understand the equity implications of MBUFs, another frequently
expressed concern and potential benefit (Cambridge Systematics 2009; Taylor 2010; Baker and
Goodin 2011).
10 Interstate tax evasion is when residents of a state with a high fuel tax rate travel to another state to purchase motor fuel taxed at a
relatively lower rate. Alternative MBUF implementations will, however, introduce new and varied possibilities for tax evasion.
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