Mileage-Based User Fee Winners and Losers

An Analysis of the Distributional Implications of Taxing Vehicle Miles Traveled, with Projections, 2010-2030

by Brian A. Weatherford

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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). The author estimates changes in annual household demand for VMT in response to changes in the cost of driving that result from adopting various MBUF alternatives, and finds that a flat-rate MBUF would be no more or less regressive than fuel taxes, now or in the future. The findings suggest that equity considerations based on ability to pay would not be a significant reason to oppose or support the adoption of MBUFs. While the equity implications of MBUFs are minimal, 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. However, it is possible to structure an MBUF that provides incentives for fuel efficiency while maintaining the other favorable qualities of MBUFs, such as their economic efficiency and fiscal sustainability.

Table of Contents

  • Chapter One

    Mileage-Based User Fees

  • Chapter Two

    The Equity of Highway User Fees and Taxes

  • Chapter Three

    Data and Model

  • Chapter Four

    Methodology

  • Chapter Five

    The Equity Effects of Mileage-Based User Fees

  • Chapter Six

    Future Distributional Implications, 2010 - 2030

  • Chapter Seven

    Conclusion

  • Appendix A

    Technical Appendix

  • Appendix B

    Additional Tables

This document was submitted as a dissertation in March 2012 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Martin Wachs (Chair), Howard Shatz, and Thomas Light.

This report is part of the RAND Corporation dissertation series. PRGS dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a PRGS faculty committee overseeing each dissertation.

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