WASHINGTON – A Washington-based think tank is recommending that Congress consider implementing a fee that would charge drivers for the miles they travel to help fund highway and bridge construction and repairs.
The American Action Forum said charging for vehicle miles traveled (VMT), coupled with congestion pricing to reduce inner-city traffic, would be more effective than simply raising federal fuel taxes to pay for transportation infrastructure improvements.
“The country’s highways and bridges are in dire need of repair,” the forum said in a study of ways to shore up the Highway Trust Fund (HTF), a primary source of federal funding for highway and transit projects that is expected to be insolvent by 2021.
“Congress should consider a combination of user fees to prevent insolvency of the HTF and secure long-term funding for America’s roads and bridges,” the study said.
“Reforms to the current gas tax will help temporarily. But to secure future revenues, a mileage-based tax and congestion pricing are more appropriate tax schemes for stable, long-term highway funding.”
For the past 10 years, highway spending has exceeded HTF revenues, requiring transfers from the general fund. The study suggested that Congress could limit the use of HTF revenues to the repair and expansion of highways, instead of both highways and transit projects.
The Mass Transit Account receives an estimated 16 percent of HTF revenues, and all of these funds come solely from federal fuel and truck-related taxes, not transit-related taxes.
“While investment in transit is necessary, the gas tax only captures highway use,” the study said. “Thus, there is an argument that revenues should only be used for the repair and expansion of highways.”
The forum noted that the federal gas and diesel taxes have remained at 18.4 cents and 22.4 cents, respectively, since 1993. Neither tax is indexed to inflation, meaning each year since 1999 the purchasing power of revenues from the taxes have generally been decreasing.
While groups have warmed to the idea of increasing the fuel tax, there is concern over the sustainability of the gas tax to support highway spending.
Skeptics of raising the tax point to increased fuel efficiency of vehicles and the development of alternative fuel vehicles as threats to future gas consumption – and thus to the sustainability of the tax itself. Cars today require less fuel than ever before.
That has resulted in proposals to implement a mileage-based user fee as a financing mechanism to replace the traditional gas tax. Rather than taxing motorists for every gallon of gas purchased, the mileage-based tax would charge motorists a fee for every vehicle-mile they travel.
Oregon was the first state to pass a law implementing a mileage-based user-fee program to pay for its transportation system. Prior to implementing the mileage-based program, Oregon piloted the user-fee program twice before, once in 2006 and again in 2012.
Under Oregon’s current program, a driver contributes 1.5 cents for each mile driven, regardless of rural or urban location or the vehicle’s fuel efficiency. Pilot programs have also begun in California, Colorado, Hawaii and Washington. Nine other western states have begun researching implementation of a mileage-based tax.
“Implementing a mileage-based tax in place of the current gas tax would help to restore stability to the HTF,” the study said. “Vehicle miles traveled have been growing at a greater rate than motor fuel use since the gas tax was last raised.”
The forum also suggested the use of congestion pricing, which aims to reduce rush-hour traffic by incentivizing commuters to use other transportation modes such as carpools, biking and transit, or to travel during off-peak hours.
This incentive is typically created by varying toll prices based on demand. Depending on the time of day or the amount of traffic on the road, tolls increase or decrease accordingly.
“Other industries apply the same principle behind congestion pricing,” the study said. “Airlines charge higher prices during the holidays when more individuals will be flying. Similarly, hotels charge higher rates for rooms when there is an event or convention in town because the demand is higher.”
The study concluded that a mileage-based tax is a more stable alternative to the gas tax, but said immediate implementation of a federal mileage-based tax is unrealistic in the short term.
“While Congress may be eager to implement the user fee, states cannot make a change to a tax scheme that is not yet fully developed,” the study concluded. “Given that the HTF is estimated to become insolvent in 2021, a mileage-based tax will not address imminent funding issues. And neither the mileage tax nor the gas tax addresses the costs associated with congestion.
“In order to address the HTF solvency problems (both short and long-term) and capture costs associated with congestion, Congress should consider a combination of user fees. To keep the HTF solvent in the short-term, Congress should consider a gas tax increase (along with indexing).
“Although a mileage-based tax is more effective at securing reliable highway funding, the HTF will become insolvent before any such tax can be implemented nationally. To secure the necessary funding for infrastructure investment until the mileage-based tax can be fully implemented, Congress should look at ways to improve the existing gas tax.”
