Tiered System Based on Vehicle Miles Traveled for Highway Financing

The development and maintenance of highway infrastructure in the US is becoming an important challenge due to increasing costs and revenues that are not adequate to meet the costs. Traditionally, fuel taxes have provided a significant portion of the revenues for the highway network. However, the increased sales of hybrid and alternate fuel vehicles along with stricter policies on improving fuel efficiencies pose a high risk of reducing revenue for highway funding. On the other hand, construction and maintenance cost increase significantly over the years. This makes the issues associated with highway financing a challenging process. User fee based on vehicle miles travelled (VMT) is one of the options considered by various agencies across the country. In this paper a modification of the VMT based user fee, a tiered system, is discussed. Here, definition of tier based system and its advantages are illustrated using revenue for highway trust fund as an example.