Mileage-Based User Fee Winners and Losers - RAND Corporation

A change in transportation tax policy will not directly impact households that do not own
any vehicles. However, their welfare is affected by changes in externalities such as air pollution, for
example, that affect all households equally regardless of how much they drive. The average income
of households that do not own a vehicle is 66 percent lower than other households. Given this large
difference in income, it is necessary to account for all households to avoid overestimating the
regressivity of fuel taxes and MBUFs.
Table 3.1 shows that VMT per household has declined by eight percent between 2001-02
and 2008-09. The two factors that are most likely driving this trend are higher fuel prices and the
economic recession that began in 2008. Retail gasoline prices rose by 88 percent, from $1.64 to
$3.08, in constant 2010 dollars. Meanwhile, the economic recession increased unemployment and
reduced average incomes (Hurd and Rohwedder 2010). The summary statistics in Table 3.1 appear
to reflect these effects of the economic recession with the average number of workers per
household falling by 17 percent and income in households earning less than $100,000 per year falling
by 4 percent. 17 These statistics may also reflect the demographic trends of shrinking and aging
households. 18 Nonetheless, both employment and income are positively correlated with VMT.
Table 3.1 highlights other relevant trends in vehicle and household characteristics. The
average “on-road” fuel economy of household vehicles increased by 2 percent. 19 In addition, the
average age of household vehicles increased by about 7 months. Household size declined slightly,
with 4 percent fewer people and 2 percent fewer drivers.
The average annual fuel tax also declined in real dollars between the 2001 NHTS and the
2009 NHTS. This is due in part to lower VMT. However, these figures also reflect a decline in the
real tax rate, on a per-mile basis, as discussed in previous chapters. The 18.4 cent per gallon federal
gasoline tax rate generated 1.1 cents per mile in 2001-02. By 2008-09 this had fallen to 0.9 cents per
mile with inflation and the small improvement in average vehicle fuel economy. The average perhousehold
state fuel tax fell by less than the average per-household federal fuel tax because some
states increased their fuel tax rates during this period.
As previously noted, on-road vehicle fuel economy has improved by 2 percent, from 20.7
MPG to 21.1 MPG. While the fuel economy of new vehicles, for both automobiles and trucks,
improved over this period, consumers also began to purchase larger numbers of SUVs. This trend
constrained the overall improvement in fuel efficiency because light trucks, a category that includes
pickups and SUVs, are less fuel efficient than automobiles. The proportion of the population
owning at least one light truck increased from 43 percent in 2001-02 to 50 percent in 2008-09.
Some readers may find the fuel economy statistics in Table 3.1 to be lower than expected.
This is because the official EPA fuel economy ratings have been adjusted by the EIA to better
reflect vehicle fuel efficiency under “real world” driving conditions (US EIA 2011b). The EPA
measures vehicle fuel economy in a controlled setting and these have been criticized as being
unrealistic (Sallee 2010, 35). In order to better estimate actual household motor fuel consumption,
the EIA uses a model to adjust, typically lower, the EPA fuel economy based on certain household
17 Income for the entire population actually rises by 4 percent, as shown in Table 3.1, because the average income of households
earning more than $100,000 per year also rises.
18 VMT, income, and fuel price are important variables that have been estimated, instead of directly observed. The methods used to
estimate these variables are discussed later in this chapter. No attempt to causally link the economic and demographic trends cited
here with these descriptive statistics has been made; it is sufficient to note that a number of factors have led to the observed
reduction in household VMT between the two surveys.
19 The official EPA vehicle fuel economy ratings that are familiar to most readers are adjusted in the NHTS by the EIA to better
reflect actual driving conditions which typically reduce the fuel efficiency of vehicles. The method used by the EIA to estimate these
“on-road” fuel economy statistics is described in the text later in this chapter
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