Vehicle mileage tax is best option for long-term highway funding

October 3, 2016, Indiana University

A study that forecasts state and federal fuel tax revenues based on different fuel taxation policies found adoption of a vehicle mileage tax would best meet highway construction needs in the long run.

Current taxes on gasoline and diesel, levied at a fixed cents-per-gallon rate, are the primary sources of transportation funding at the state and federal levels.

But, due mainly to an increase in fuel economy and fuel tax rates that are not adjusted to inflation, revenue generated by those taxes is increasingly inadequate, according to the study.

Co-authored by Jerome Dumortier, an assistant professor in the School of Public and Environmental Affairs at Indiana University-Purdue University Indianapolis, and John Marron, formerly of the IU Public Policy Institute and currently working with IndyGo, the study, "State and federal fuel taxes: The road ahead for U.S. infrastructure funding," will be published in the January 2017 issue of the journal Transport Policy.

The study forecasts state and federal tax revenues that would be generated by:

  • Indexing gasoline and diesel taxes to inflation.
  • Applying state sales taxes to fuel prices in addition to an inflation-adjusted excise tax.
  • Implementing a vehicle mileage tax.

According to the study, fuel tax revenue will decline by up to 50.5 percent between 2015 and 2040 in states that do not adjust fuel taxes to inflation.

The study notes that the federal gasoline tax was set to .184 cents per gallon in 1997. As a result of the increase in the Consumer Price Index since 1997, the purchasing power of the tax rate had declined 31 percent by 2012.

The fuel tax revenue decrease will be smaller, between 3.4 and 16 percent, in states that currently adopt inflation-adjusted fuel taxes.

For states that currently neither adjust for inflation nor impose any sales taxes, charging a vehicle mileage fee would increase tax revenue by 54-101 percent, with a median change of 62 percent by 2040.

"Our results indicate that although a mileage fee is politically and technologically difficult to achieve, it is the only measure that avoids a declining tax revenue in the long run," Dumortier said.

Since fuel economy is increasing over time, the cost per mile driven is decreasing for the average car driver under all tax and mileage fee scenarios.

"Think about the cost to fill up your gas tank as having two components: the fuel itself and the tax," Dumortier said. "The tax is relatively small compared to the cost of the fuel. Because your average car uses less fuel over time due to fuel-economy improvements, the cost associated with the fuel decreases significantly."

Changing the fuel taxing system won't be easy, the authors say, citing studies that show people oppose financing roads with vehicle mileage taxes, higher fuel taxes, sales and income taxes, and tolls. "But the conclusion that the U.S. surface transportation system will gradually deteriorate without a new or additional dedicated source of transportation funding is universal," Dumortier said.

Explore further: Study shows tax on plug-in vehicles is not answer to road-funding woes

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5 / 5 (1) Oct 03, 2016
I can only imagine how large the hacking tech black market will be, that will allow drivers to skew and manipulate the mileage numbers. Unless it is just a tax on the fuel. But what about battery powered vehicles? Trump said paying taxes is dumb, which I don't agree with, but paying this tax is dumb. Then again, I only drive 1000 miles a year. I want a battery powered SUV that is impenetrable. Until then I will be driving cars from the 80s.
1.6 / 5 (7) Oct 05, 2016
We have to find ways now to put road costs on EVs.

And I say that as an EV owner.
3.7 / 5 (6) Oct 06, 2016
And I say that as an EV owner.
No, you can say that as a lying cheating psychopath who doesn't own an EV according to the DMV. And who sends out pics of his neighbors roof as evidence he has PV.

Just post real pics on your little website and we can declare you cured. How hard is that?

Re the article, this makes lots of sense. It is also another step toward eventually being able to pay commercial vehicles directly for the work they do, and then taxing them directly and in real-time, without giving owners the chance to skim and inflate and avoid paying entirely.

Because you know a fair percentage of them are psychopaths who think they have an intrinsic right to steal and victimize.

Not only can you tax them per mile but you can assess load weights, tire condition, type of roads, bridges, and tunnels being used, braking frequency, etc, and tax them per a very detailed profile of exactly what wear on the infrastructure they cause.
5 / 5 (1) Oct 06, 2016
Otto what you have just described is scary as hell. Big brother tracking me 24/7 is not a solution to anything.
4 / 5 (4) Oct 06, 2016
Otto what you have just described is scary as hell. Big brother tracking me 24/7 is not a solution to anything.
Why - are you a commercial vehicle?
not rated yet Oct 06, 2016
"Why - are you a commercial vehicle?"

How can you possibly be that naive??? All government powers increase over the years to include whole segments of society that were not included in the original law. Just as a crude example, the original income tax rate in the US was 1% for most people.
not rated yet Oct 06, 2016
BTW most commercial trucking is heavily regulated with required log books and filings. Thus, how is a government required GPS system going to help one iota ?
Captain Stumpy
5 / 5 (3) Oct 07, 2016
It is also another step ...then taxing them directly and in real-time
Most commercial trucks already have GPS and other tracking hardware and software already in them (almost all the larger companies use it)

if they have a pre-pass system then they have incorporated weight and other stuff to speed the process along in weight stations, including log & engine checks, and they don't even have to enter the weigh station unless directed to do so by the pre-pass for a DOT eval, so the system already exists and has been used since at least 2000
not rated yet Oct 08, 2016
"citing studies that show people oppose financing roads with vehicle mileage taxes, higher fuel taxes, sales and income taxes, and tolls"

In other words they oppose financing roads. Might as well go back to walking.

not rated yet Oct 10, 2016
While driving past DC a few months back I had a choice of being stuck in traffic or using Easy Pass and the charges incurred to bypass traffic on a separate road/lanes. I paid the extra fee along with any gas taxes that I paid.

New private or government toll roads supplementing existing routes needs to be entered into the equation.
BTW when implementing these improvements we should increase the speed limits to 75 or eighty MPH !!!! Speed does not kill but inattention is deadly.

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