Time for a Change – VMT Solutions for Value Added Services

The fuel tax, which the United States has relied on for 80 years to maintain and improve the nation’s roads and transit system, is in jeopardy. Increased vehicle fuel efficiency and a poor economy already hamper fuel tax revenue production; in addition, a sizable increase in the corporate average fuel economy standards (CAFE) for new vehicles will have a devastating impact on highway funding. The nation must find an alternate funding source to maintain the health of the highway system and its positive multiplier on jobs and the economy. Policymakers have considered replacements for the fuel tax—sales taxes, registration fee increases, personal or real property taxes, income tax, value‐added tax, tolling high capacity highways, taxes on oil company profits and others —but each shifts the burden of paying for the roads from one type of user to another, or to non‐users. The only fair way to apportion road costs is based on usage. This paper discusses an alternative to the fuel tax on gasoline, the vehicle mileage tax, or VMT. Policy, technology and collection issues are addressed.