Bottom-Up Implementation of VMT Fees

As federal funding for transportation continues to decline, states must find new revenue sources

Background and Question

Many policy analysts agree that a “vehicle-miles traveled” fee, a literal tax for actual road use, is an effective replacement for the current gas tax to pay for our roads and bridges. A penny-per-mile tax would raise enough to match the existing 18.4 cent-per-gallon fuel tax, while two cents-per-mile would raise enough to maintain infrastructure investment in the long run, according to the oft-cited report from a Miller Center conference co-chaired by former Transportation Secretaries Norman Mineta and Samuel Skinner. As the report makes brutally clear, a lot still stands in the way.

The most obvious hurdle to overcome is privacy: How can the government assure citizens that it won’t abuse the power to track individuals? How will that data be protected? Should vehicles be taxed differently based on their footprint or when they are used (i.e., peak v. non-peak hours)? How will the fees collected be divvied up fairly? And, critically, how can such a major change be packed into a pill the American public can swallow?

Perhaps we have a touch of Pollyanna in us, but we think now would be a good time to talk about whether the VMT ever will be a viable option for funding infrastructure. We may live in partisan times. But we are not backward technologically. Will the driving tax ever happen? If so, how do we get there? Is the technology ready? Is the public ready? Are lawmakers ready? Give us your scenarios.

Response

By Emil Frankel

A VMT fee, or some similar system or systems of user-based charges, is likely to emerge over time, as a principal source of funding for the nation’s highway and road system. As two national commissions and a range of organizatins, including the Bipartisan Policy Center (BPC), have noted, motor fuels taxes are not sustainable sources of revenue for transportation. Indeed, a decline in transportation’s dependence on petroleum is in the national interest and will, in any event, be the result of market- and regulatory-driven improvements in energy efficiency.

However, this transition will not happen soon, and we are likely to remain largely dependent upon gasoline and diesel taxes at both the federal and state levels for some time. Moreover, the political, financial, and technological hurdles to the introduction of a federal VMT charge seem substantial. Thus, as other respondents to this question have noted, change is likely to come from the bottom up, that is, VMT charges and more extensive use of tolling and other user charges almost certainly will be first introduced at the state and local levels. In our federal system of government, where states are the laboratories of democracy, this is probably preferable. User charges can be ever more widely tried at the state and local level; indeed, states are likely to have to turn to such revenue sources, as federal funding for transportation improvements continues to decline and to become ever more uncertain.

However, the federal government should not be passive in this movement. For now, as the proposed amendment to MAP-21 by Senators Carper, Kirk and Warner sought to accomplish, current federal pilot programs for tolling and user charges should be extended, and the caps on participation should be removed. All federal barriers to tolling and user charges should be removed, and implementation of such user-based revenue programs at the state and local levels should be incentivized by the federal government through a system of rewards or bonuses to those states and metropolitan regions that introduce them.

These fees will graduallly, but steadily, be implemented, but this will not occur quickly, nor all at once, and probably not widely at the federal level. The technology is there, and, with education and greater use of demonstration or pilot programs, public support can be achieved, but the adoption of VMT fees will occur slowly, state-by-state, region-by-region.