Is A Vehicle-Mile Tax a Viable Alternative to the Gasoline Tax? A Review of Socio-Economics and Distributional Considerations

This paper describes how, in the recent years it has become evident that the gasoline tax – the primary way that highway user fees are collected at both state and federal levels in the U.S. – may no longer be able to generate the funds needed to build and maintain the highway system. According to Cambridge Systematics (2005), maintaining the nation’s current highways and transit systems required approximately $222 billon in 2005, and that amount is estimated to be $295 billion for the year 2015. In order to improve the current highways and transit systems would require $271 billion (2005) and $356 billion (2015). However, 2005 revenues were only about $180 billion from all levels of government, well short of covering even highway maintenance costs. A large part of the problem has been increasing public resistance to increases in the gasoline tax, at both federal and state levels. At the same time, the purchasing power of revenues has been eroded by inflation, the cost of some construction materials such as concrete and steel have increased even faster than inflation, and highways have been wearing out faster than expected due to higher than predicted traffic flows. Exacerbating the current highway finance system in the future is the potential for alternative fuels that are not currently subject to gasoline/diesel fuel taxes and increased fuel efficiency. These things have made it clear that an alternative to the gasoline tax is necessary if highways are to be maintained and built to meet current and future needs.