New Report Calls for Top-Down Mileage Fee Program

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My Reason colleagues and I have long argued that per-gallon fuel taxes should be replaced by mileage-based user fees (MBUFs). I served on the Transportation Research Board committee that alerted the transportation community to the looming decline of fuel tax revenues, in 2006. My colleague Adrian Moore served on the National Surface Transportation Infrastructure Financing Commission (NSTIFC) that assessed a range of alternatives and concluded that per-mile charges were the best replacement (2009). Adrian went on to help found the Mileage-Based User Fee Alliance, which has encouraged a growing array of state and multi-state pilot projects to test various ways of recording and reporting miles traveled so that the miles can be charged for.

Now the former chairman of the NSTIFC, Rob Atkinson, has released a new report on this important subject. “A Policymaker’s Guide to Road User Charges” restates the case for charging by the mile, debunks several misconceptions about MBUFs, and then proposes a federal effort to implement per-mile charging, with the idea that states could then piggy-back on the federal system to collect state-specific MBUFs to replace their state fuel taxes.

While I disagree with some of what Rob advocates, this report makes a major contribution by showing that many concerns about MBUFs are not supported by the facts. One of the most important is the idea that a system using GPS would “track” everywhere the vehicle goes. He points out, correctly, that GPS is a one-way system: it enables the car to knowwhere it is at all times, but the GPS satellite and its operators do not know. The basic concept is that an on-board unit on the vehicle would total up the miles driven (and which states those miles occurred in) and transmit the totals to the relevant jurisdictions (e.g., New York and New Jersey) so each can levy per-mile charges.

Another oft-heard concern is that because rural residents drive longer distances, they would be made worse off by a miles-charged system. Drawing on research from Rand Corporation and others, Rob’s report explains that rural residents tend to own older, gas-guzzling vehicles compared with urban residents, so most of them would be better off paying by the mile rather than by the gallon. Detailed TRB research papers bear this out. Similar data call into question the equity argument; Rob reminds us that lower-income households tend to drive older, less fuel-efficient vehicles compared with wealthier people. Like rural residents, most low-income urban-area residents would be better off paying by miles driven than by gallons used.

The above points depend, of course, on MBUFs replacing federal and state fuel taxes, rather than being charged in addition to them. And this is where I start to differ from Rob’s top-down, federal mandate as the best way forward. Specifically, he would like Congress to charge the US Department of Transportation to establish a federal MBUF, starting with imposing this on trucks. The next step would be to impose on auto manufacturers the inclusion of a GPS-based on-board unit for per-mile charging in all new vehicles. As older vehicles are scrapped and replaced by new vehicles (over perhaps 20 years), all vehicles would eventually be paying the federal MBUF. States would be free to opt into the federal system, adding a state MBUF to be collected by the same on-board units required in all trucks and all new personal vehicles.

As a strategy for winning hearts and minds to this huge paradigm shift, I think this is exactly backward. The large majority of the public thinks a GPS system is Big Brother in their cars and will mobilize against a federal mandate of this sort. By contrast, the states remain the laboratories of democracy. Surveys of motorists (and truck drivers) who have participated in the pilot projects find that those people come to understand what MBUF is and is not. Thus far the pilots generally offer people a choice of ways to record their mileage, and the miles are reported to a private-sector service provider, not the state government, with strict privacy protections. I think we need more, and larger, state and multi-state pilot projects to learn more about how to build majority support for the transition from per-gallon to per-mile.

State governments have far more credibility with motorists than Congress does, so the odds of gaining a political majority in favor of replacing fuel taxes with mileage charges are much greater at the state level. Once a number of states have figured out a way to implement this transition, Congress would have a better chance of building on states’ success to develop a federal mileage charge.

A version of this Commentary originally appeared in May’s Surface Transportation Newsletter #187.

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