Think about the last time you filled up your car at the pump. As you watched the meter zoom up, you were acutely aware of the money you’re spending on fuel. You might even buy a different car, drive less, or live closer to work to soften the pain of watching that meter rocket upward endlessly.
But burning petroleum isn't the only cost incurred for personal mobility. When was the last time you felt the pain of spending money on the roads you use? Unless you regularly drive on toll roads, you haven’t. That's because we pay for roads through a convoluted mix of fuel, sales, property and income taxes at the federal, state and local level. And we don’t pay nearly enough to maintain the system we need and deserve. The most sustainable, equitable and efficient way to fund transportation infrastructure is a national road pricing system based on vehicle miles traveled (VMT).
The technology is available to make a VMT fee system work. Instead of paying for roads through a complicated set of taxes, you are charged a streamlined per-mile fee. A GPS unit is installed on your car and every time you fill up it transmits your mileage charges to the fuel pump and adds it to your bill. (1) If you drive an electric car – or in the future, a hydrogen-powered car – a different collection method is used. The system must be national in scale to accommodate widespread travel across state lines.
Withhold your fears about big-brother government for a moment: several studies have identified ways to build robust privacy safeguards into the system so your driving data is recorded at a bulk level. (2) This makes it impossible for someone to use the data to pinpoint when and where you drove.
To maintain and improve our transportation system, the per-mile fee would be around 2.3 cents per mile. (3) Remember, you’re already paying this money through other taxes. A national VMT system would replace those taxes and empower you to control how much you spend on roads through your driving behavior.
Federal and state fuel taxes, which make up the majority of transportation funding, are not sustainable in the face of technological change. The tax base is withering away as fuel efficiency improves, and the inevitable decline of the combustion engine will render the tax entirely useless. And not only is the base shrinking, the effective tax rate is declining. The federal tax, last raised to 18 cents per gallon in 1993, has lost 33% of its buying power to inflation. (4) Over the next 20 years, our current funding system will fall short of total needs by about $200 billion a year. (5) A VMT fee system can collect payments regardless of vehicle technology, whether that be conventional combustion engine, hydrogen fuel cell or battery electric. Prices should be indexed to inflation, as well, to keep up with rising costs of construction and materials.
A VMT pricing system also upholds the American values of fairness and equity. The more you use the road, the more you pay for it. While fuel taxes indirectly charge for use, they are still fraught with inequity. A hatchback and a heavy duty pickup truck pay the same rate, even though the pickup does far more damage to road infrastructure. Electric vehicles and hybrids with high fuel efficiency pay nothing or very little in fuel taxes relative to road use. Additionally, local sales and property taxes, which are increasingly used for transportation, charge everyone equally, regardless of where, when and how often (or if) they drive. These taxes are also regressive in nature: they capture a higher percentage of the earnings of low-income families than wealthier families. A national VMT system is a direct and proportional user fee that can be equitably calibrated based on costs imposed and income levels.
Most importantly, a national VMT pricing system can lead to more efficient use of infrastructure. Per-mile prices can be set according to actual costs of driving at specific times on specific roads. Driving on the freeway at rush hour contributes to greater congestion and pollution, so the price would be set higher. If you can commute at an off-peak time or take transit, you’ll be rewarded. You will have an incentive to combine trips or make shorter trips. Driving will have a perceptible cost, just like most other things you consume, and you have the freedom to control how much you spend.
The cumulative effect of more efficient individual behavior is a more efficient and dependable transportation system. Less money will be wasted on adding lanes to highways that are only used two hours of the day. Planners will know precisely level of demand for every road at every hour, taking the guesswork out of deciding where to build or expand roads, saving an incredible $38 billion per year in capital spending on highways. (6)
With less congestion, transit services will be faster and more reliable, and higher fare sales from people switching modes mean less subsidies from other taxes. One study estimated a 39% reduction in operating costs for bus transit. (7) Commercial transportation stands to gain immensely from less congestion and more reliable travel times; delays in shipping or supply chain logistics are far more costly than personal delays.
We must address our transportation funding crisis and a direct and proportional user fee system is the most equitable, efficient and sustainable way to do it. The costs of driving – how much we pay for open roads and clean air – should be a transparent price that gives us the opportunity to make informed choices about how, where and when we travel. We have the technical capacity to create this system, now we just need the political will to make it a reality.
1) Based on Oregon VMT pricing pilot test. See Zhang, & McMullen (2008).
2) NSTIFC (2009), p. 151
3) NSTIFC (2009), p. 203
4) NSTIFC (2009), p. 28
5) NSTIFC (2009), p. 139
6) NSTIFC (2009), p. 151
7) Small (2004), p. 21
National Surface Transportation Infrastructure Financing Commission (NSTIFC) (2009). Paying our way: A new framework for transportation finance. Washington, DC.
Small, K. A. (2004). Road pricing and public transport. Research in Transportation Economics, 9(1), 133-158.
Wachs, M. (2003). Improving efficiency and equity in transportation finance. Brookings Institution, Center on Urban and Metropolitan Policy.
Zhang, L., & McMullen, B. S. (2008). Statewide distance-based user charge: Case of Oregon. Transportation Research Board 87th Annual Meeting (No. 08-2183).