Is a Vehicle-Mile Tax a Viable Alternative to the Fuel Tax? Socio-Economic and Distributional Impacts

Given the dependence of the U.S. economy on the transportation of both people and goods on the highway system, the continued maintenance of the highway system is a major priority to policymakers. The Federal government and most states collect highway user fees from vehicles though the use of a fuel (gasoline/diesel fuel) tax, registration fees, and a variety of excise taxes. For light vehicles such as cars, motorcycles, vans, pickups, and sports utility vehicles (SUVs), fuel taxes are the primary source of highway funding at both the Federal and state level. In recent years, highway user fee revenues have not increased at a pace sufficient to meet the increasing costs of highway infrastructure. The predicted downward trend in revenues collected from the gas tax as the popularity of fuel-efficient hybrid vehicles and alternative-fuel vehicles continues to grow, is a concern to highway planners. Accordingly, policymakers at both the state and Federal levels are exploring alternatives to the gasoline tax (TRB project 2062, in progress and the Oregon Road User Fee Task Force, to name two examples.) The purpose of this paper is to provide a review of the existing literature dealing with the socio-economic and distributional impacts of gasoline and vehicle mile taxes to gain insight into the distributional consequences of replacing the gasoline tax with the vehicle mile tax. Problems in the measurement of distributional effects are discussed and preliminary static results are presented for the state of Oregon.