13 Frequently Asked Questions About Mileage-Based User Fees
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FAQ

13 Frequently Asked Questions About Mileage-Based User Fees

With the gas tax becoming increasingly unsustainable, mileage-based user fees offer a fair, reliable and sustainable funding mechanism for roadways.

Introduction

Using the gas tax as the main highway funding source is becoming increasingly unsustainable.

First, the purchasing power of the fuel tax is declining due to the growing number of electric and hybrid vehicles as well as the increasing fuel efficiency of conventional vehicles.

Second, highways have suffered, as many U.S. states and localities have diverted specific fees and taxes designed to fund them. The lost revenue from diversions and the decline in purchasing power result in increased congestion, additional traffic accidents and shorter vehicle lifespans due to poor pavement conditions.

While the per-gallon fuel tax served the country well for decades as the nation’s primary highway funding source, its shortcomings have become more apparent over time. Often fuel tax increases are not politically palatable, and even when implemented fall short of providing the needed funding. The diversion of highway funds to non-highway sources intensifies the problem.

To more effectively and equitably fund our nation’s roadways, transportation agencies need to adopt a stronger users-pay/users-benefit approach that does not depend on fuel use and that strengthens the link between where revenues are obtained and where they are spent.

Policymakers are examining mileage-based user fees (MBUF) as a more sustainable revenue source than the gas tax. Using MBUFs as the main funding source is fairer, more reliable and more transparent, and better equips transportation agencies to face continued changes in vehicle propulsion.

Funding roadways through fuel taxes served the nation well for most of the 20th century, but increased fuel economy, coupled with the increase in electric and hybrid vehicles, has made fuel taxes an unreliable revenue source. Even while many states have managed to raise fuel tax rates to compensate for some of the funding problems, the decline in overall fuel tax revenues is projected to worsen considerably in the coming decades. Without a change in funding method, the fuel tax will become increasingly unsustainable.

While per-mile charging was not a viable alternative in previous decades, technological advances and a decreasing ability to fund roads and highways adequately have made user fee models such as MBUFs and tolling more attractive. Oregon’s experience has already proven that an MBUF system can work effectively and gain public acceptance.

Charging users based on the miles they drive will continue to face public skepticism, and the transition from per-gallon to per-mile funding will be substantial. But the various state pilot projects show that concerns over privacy and fairness have been (so far) unfounded. And while the concept does require some adjustments for drivers, participants appear to have easily adapted to them.

From an agency standpoint, operating under a mileage-based funding arrangement appears to deliver the least headaches: Everyone pays for what they use, no one avoids paying for what they use, and formulas can be designed and tweaked to ensure that sufficient funds are available to properly maintain roads.

By avoiding fuel taxes’ inherent and increasing problems, MBUFs offer the best path forward to ensure roads and highways receive the most effective funding through an approach that is fairer, more reliable and more sustainable.

Here are 13 frequently asked questions about mileage-based user fees.

Frequently Asked Questions: Mileage-Based User Fees

 

Baruch Feigenbaum is senior managing director of transportation policy at Reason Foundation and lead author of Reason's Annual Highway Report.

Austill Stuart is the director of privatization and government reform at Reason Foundation and editor of Reason's Annual Privatization Report.