The U.S. Department of Transportation appears headed toward a significant policy shift with potentially major implications: a move from a federal gas tax to a vehicle miles traveled (VMT) tax. In speculating about what the DOT calls a “new sustainable user-fee based system,” expert analysts point out that a VMT tax recently earned specific mention from top-level DOT officials.
Embracing a taxation system based on vehicle miles traveled could prove to be a game-changer. Advocates have applauded the policy shift as a fair, balanced way to provide the Highway Trust Fund and other federal road infrastructure programs with badly needed financing.
Let’s break this down by examining what a VMT tax is, how it might work, and what its potential advantages and drawbacks include.
What is meant by “vehicles miles traveled?”
In transportation demand management (TDM) circles, the term “vehicle miles traveled” refers to usage-based approaches to taxation. VMT taxes essentially charge drivers based on how frequently they use roads: the more a person drives, the more they pay in taxes. Those tax revenues are then used to cover driving-related public expenses, such as road maintenance and remediating the environmental damage caused by vehicle emissions.
The federal government is reportedly considering a VMT tax to either supplement or outright replace the current model, which taxes gasoline purchases. Gas taxes and surcharges currently serve as a major source of money for the Highway Trust Fund, but critics believe the model has outlived its usefulness: improved vehicle fuel efficiency ratings mean drivers are purchasing less gasoline. Many policymakers would also prefer to move to a system that encourages motorists to think more actively about the social and financial costs of their transportation choices.
How would a vehicle miles traveled tax work?
According to the U.S. Energy Information Administration, federal gas taxes charge 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel as of July 1, 2020. States also apply their own gas taxes, which averaged 29.86 cents per gallon of gas and 31.76 cents per gallon of diesel as of the same date.
A vehicle miles traveled tax would either replace the gas tax or apply on top of it. Vehicle miles traveled taxes have already been implemented by some regional governments. For instance, Oregon introduced one in 2013. Federal policymakers have not yet publicly committed to a structural approach, but TDM experts believe it could take one of two forms:
- Flat rate: Drivers pay a set fee per mile traveled, regardless of when or where they drive.
- Variable or dynamic rate: Sliding rates apply, depending on factors such as the time of travel, the weight of the vehicle, the vehicle’s fuel efficiency rating, the number of passengers in the vehicle, road congestion levels at the time of travel, the location of the road, and the type or class of road being used.
Variable-rate policies appear to have stronger support and would likely be an easier sell to the public, but they also come with unique logistical challenges. Technology-based monitoring systems would need to be widely implemented to fairly and reliable track relevant data. It is not yet clear whether the government or citizens would shoulder or share the associated cost burdens.
One recent analysis suggests that a VMT tax would need to generate the equivalent of 1.7 cents per mile to meet the country’s highway funding needs. The average U.S. driver travels about 13,500 miles per year, which would work out to about $229.50 per person per year, or just over $19 per month.
What it means for commuter mobility
Here are key advantages of a taxation system based on vehicle miles traveled:
- It creates a fair, usage-based system that works for all vehicle types
- It stands to substantially increase revenues for road and highway maintenance
- It functions as an efficient, targeted taxation model and encourages drivers to think more carefully about the impacts of their transportation choices
- It encourages mode shift and behavior change
However, there will be challenges to implementing VMT taxes:
- Dynamic VMT taxation systems require new kinds of monitoring technologies, and privacy issues will have to be worked out
- Up-front implementation costs of necessary monitoring and tracking technologies would be high
- They could disproportionately impact drive-alone super commuters and car-dependent rural areas
In general, VMT taxes enjoy stronger levels of support among those actively seeking to reduce the environmental toll of driving. Proponents also say they more accurately distribute cost burdens among those who choose to drive the most. However, there are important issues around privacy and equity that will need to be addressed.
RideAmigos helps organizations plan for the effects of policy changes
If implemented on a national level, a vehicle miles traveled tax could substantially alter transportation patterns and impact commuter programs. Stay ahead of the curve with RideAmigos programs and expertise. We’re here to help you get started with innovative and effective TDM solutions for businesses and organizations.