Mileage-Based User Fee Winners and Losers - RAND Corporation

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The Pardee RAND Graduate School dissertation series reproduces dissertations that have been approved by the student’s dissertation committee. The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R ® is a registered trademark. All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 2012 by the RAND Corporation 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 RAND URL: http://www.rand.org To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: order@rand.org
ABSTRACT The mileage-based user fee (MBUF) is a leading alternative to the gasoline tax. Instead of taxing gasoline consumption, the MBUF would directly tax drivers based on their vehicle miles traveled (VMT). Equity is a commonly raised public acceptance concern regarding MBUFs. This study uses household-level survey data of travel behavior and vehicle ownership from the 2001 and the 2009 National Household Travel Survey (NHTS) to estimate changes in annual household demand for VMT in response to changes in the cost of driving that result from adopting MBUF alternatives. Distributional implications are estimated for an equivalent flat-rate MBUF, an increased fuel tax rate and it’s equivalent flat-rate MBUF, and three alternative MBUF rate structures: a 1 cent MBUF added to the current fuel tax, a tiered rate MBUF based on vehicle fuel economy, and a much increased MBUF rate. The distributional implications are then projected over the years 2015 - 2030 under eight different macroeconomic and policy scenarios. The research finds that a flat-rate MBUF would be no more or less regressive than fuel taxes, now or in the future. An increase in the tax rate, whether an MBUF or a fuel tax, causes transportation revenue collection to become less regressive because low income households have a more elastic response to changes in price than middle and high income households. MBUF “winners” include retired households and households located in rural areas. On average, an MBUF would reduce the tax burdens of these groups. MBUF “losers” are households in urban and suburban areas. The projections suggest that the distributional implications of MBUFs are unlikely to change in future years. Changes in the cost of driving, either from a higher tax rate, or other factors, appears to have a greater impact on the equity of transportation finance than whether the tax is collected by the gallon or by the mile. These results are robust to alternative sources of data and model assumptions. The findings are significant because they suggest that equity considerations based on ability to pay will not be a significant reason to oppose or support the adoption of MBUFs. While the equity implications of MBUFs are minimal, however, some groups, especially rural states, may find that the potential equity benefits of MBUFs could be overwhelmed by an increase in the tax rate to cover the higher costs of collecting and administering them. Concerns about the impacts of flat-rate MBUFs on vehicle fuel efficiency and greenhouse gas emissions are valid but, at current oil prices, the tax rate is a small percentage of the total cost of gasoline. Therefore, the overall price signals still encourage fuel efficiency. Regardless, it is possible to structure an MBUF that provides incentives for fuel efficiency while maintaining other favorable qualities of MBUFs such as their economic efficiency and fiscal sustainability. Page 5 of 131
Page 1 and 2: CHILDREN AND FAMILIES EDUCATION AND
Page 3: Mileage-Based User Fee Winners and
Page 8 and 9: Lastly, I would especially like to
Page 10 and 11: 6. Future Distributional Implicatio
Page 13 and 14: 1. MILEAGE-BASED USER FEES MOTOR FU
Page 15 and 16: Additionally, fully electric vehicl
Page 17 and 18: MOVING TOWARDS A TAX ON VEHICLE MIL
Page 19 and 20: THE EQUITY IMPLICATIONS OF MBUFS AR
Page 21 and 22: 2. THE EQUITY OF HIGHWAY USER FEES
Page 23 and 24: “regressive, progressive, or neut
Page 25 and 26: 3. DATA AND MODEL This chapter desc
Page 27 and 28: Table 3.1 Weighted Sample Means of
Page 29 and 30: values and their robust standard er
Page 31 and 32: Table 3.2 Table of Coefficients Lin
Page 33 and 34: Figure 3.1 Distribution of Price El
Page 35 and 36: This expression illustrates that th
Page 37 and 38: method used by FHWA to calculate th
Page 39 and 40: least fuel efficient vehicle is gre
Page 41: State fixed effects There are diffe
Page 44 and 45: gasoline tax with a flat per-mile t
Page 46 and 47: Alternative 3: Replace both the sta
Page 48 and 49: Alternative 8: Replace state and fe
Page 50 and 51: Disaggregating the change in taxes
Page 52 and 53: “relative share rate of return fr
Page 54 and 55:
gasoline in the United States could
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The first method divides total fede
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Risk of global warming: The margina
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additional projections based on alt
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industry and public sector energy c
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FLAT-RATE MBUFS ARE NO MORE OR LESS
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Table 5.1 Percent Change in Average
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Table 5.3 Change in the Consumer Su
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weighting of the changes in revenue
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Table 5.6 Average Changes in Federa
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Table 5.7 Components of Welfare Cha
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The finding that increasing the rat
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Table 5.10 Change in Consumer Surpl
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of adopting MBUFs. Specifically, th
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Table 5.14 Percent Change in VMT an
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side by side for each alternative.
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The findings for other groups are m
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Table 5.17 Average Change in Consum
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6. FUTURE DISTRIBUTIONAL IMPLICATIO
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e enacted. Figure 6.4 completes the
Page 95 and 96:
Table 6.1 Projections of Suits Indi
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change in consumer surplus for key
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7. CONCLUSION The purpose of this d
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The marginal costs of congestion an
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Commercial trucks were explicitly n
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The variable name for Hispanic stat
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price series from the EIA. The “M
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Table A.1 State Gasoline Excise Tax
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Table A.3 Household Type Categories
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CALCULATING THE CHANGE IN CONSUMER
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Revenue Revenue Revenue Method
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PROJECTIONS OF CHANGES IN CONSUMER
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Table B.3 Projections of Changes in
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Page 127 and 128:
LIST OF REFERENCES AAA. 2011. Your
Page 129 and 130:
Musgrave, Richard A., and Peggy B.
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Wachs, Martin. 2003. Improving effi
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Mileage-Based User Fee Winners and Losers - RAND Corporation

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