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TRUCKING INDUSTRY GUIDES:

Exploring the Implications of VMT

A Closer Look at Vehicle Miles Traveled Tax

A Vehicle Miles Traveled (VMT) Introduction

In an era where fuel efficiency is rising and traditional road funding is failing, the concept of Vehicle Miles Traveled (VMT) tax steps in to offer a sustainable alternative. This system proposes charging drivers based on the distance driven, a shift from fuel-based taxation. With our highways and wallets at stake, this article unpacks the VMT tax, its importance for future infrastructure funding, and the challenges it poses.

Key VMT Takeaways:

VMT fees offer a system to charge drivers based on miles traveled rather than fuel consumption, which includes various rates per mile considering factors including vehicle type and weight, aiming to sustain the Highway Trust Fund.
Technological advancements in GPS and alternative tracking methodologies facilitate the accurate collection of VMT fees while addressing privacy concerns, with multiple states like Oregon and Utah having successfully implemented pilot programs.
While promising a more reliable revenue source for transportation infrastructure, VMT fees present challenges including administrative costs, privacy concerns, and the necessity of garnering public support and trust for widespread adoption.

Understanding The VMT Basics

Consider a system that charges drivers based on the actual distance covered instead of their fuel consumption. This is the essence of VMT fees, a system that levies charges on vehicle users based on the distance driven on a defined network. The design of these fees can range from a simple flat rate per mile to more complex systems that consider factors such as vehicle weight and location.

Such a system could help maintain the Highway Trust Fund’s expenditures, potentially requiring a VMT fee rate of 1.7 cents per mile, varying for different vehicle types. This means lower rates for passenger cars and higher rates for heavier vehicles that cause more wear and tear on the roads. Although VMT fees are typically applied to passenger vehicles, some states have introduced weight-mile programs which tax trucks based on both distance and weight.

Road User Charges

At the heart of the VMT fee lies the idea of road usage charges, a model that seeks to replace taxing fuel consumption with taxing vehicle miles traveled within certain jurisdictions. Despite challenges in design, implementation, and administration, transitioning to a mileage fee system might yield a more reliable funding source for transportation and align with other policy objectives.

Road usage charges aim to:

Uphold the user fee principle, where users directly fund the infrastructure they utilize, aligning expenses with usage
Restore the balance that has been skewed in instances where funds collected from motor fuel taxes were allocated to non-transportation programs
Have variable rates based on vehicle weight, ensuring heavier vehicles that inflict more damage on roads contribute more to maintenance costs.

VMT Tracking & Technology

Technological advancements pave the way for the implementation of VMT fees. GPS tracking can be used to determine miles traveled within specific regions, allowing for the differentiation between travel in urban and rural areas. GPS devices enable the calculation of VMT fees by logging miles per region, and this can be done without storing or transmitting detailed trip data, thus preserving privacy.

VMT fees can also be calculated by reading odometers during yearly inspections or by on-board units at fueling stations to report mileage, without relying on GPS tracking. Assessments of technical issues have shown that various implementations are feasible, including simple per-mile charges and more sophisticated GPS-based solutions.

VMT Tax Programs: A Historical Perspective

In their search for alternative funding sources, several states have explored the concept of VMT tax programs. Take Oregon for instance, which enacted a pay-per-mile program limited to 5,000 cars, charging drivers 1.5 cents per mile and providing a rebate for the state gas tax. Following this trailblazing move, Iowa initiated a VMT tax pilot in 2008, leveraging technology to track vehicle miles traveled.

These initiatives were driven by the need to find alternative funding sources due to diminishing returns from fuel taxes. The concept of VMT taxes gained further traction when the National Surface Transportation Infrastructure Financing Commission endorsed it as a potential successor to the fuel tax in their 2009 final report. Today, state-run pilot programs testing VMT fees are facilitated by STSFA grants from the Federal Highway Administration.

Adoption & Implementation

Before a state can wholeheartedly embrace a VMT tax system, it’s essential to foster understanding and trust among its residents. Oregon’s adoption of the VMT tax system was preceded by a progression of pilot programs that played a key role in this process. The successful completion of Oregon’s second road user fee pilot in 2013 set the foundation for the establishment of their permanent road usage charge system.

Analyzing the Impact of VMT Fees

VMT fees carry significant and wide-ranging implications. Studies indicate tax revenues per vehicle mile traveled are declining due to vehicles becoming more fuel-efficient and a rise in electric vehicle adoption. The Congressional Budget Office’s 2011 report pointed out that VMT fees could better address the disproportionate road wear caused by cargo trucks compared to fuel taxes.

Mileage fee rates could be tailored for both passenger and commercial vehicles to supplement and replace the current fuel tax revenues, ensuring adequate funding for the Highway Trust Fund. The Rand Corporation’s study suggests that while mileage fees may be costlier to administer than fuel taxes, they promise a more reliable revenue stream for funding transportation infrastructure.

Benefits for Highway Systems

The positive impact of VMT fees on highway systems is immense. A VMT fee system could provide:

A more stable source of funding for surface transportation programs as fuel tax revenues decline due to improved vehicle fuel economy and the adoption of alternative-fuel vehicles
Reestablishing the user fee principle, ensuring that road maintenance costs are closely aligned with usage
Countering the practice of funding highway expenditures with non-transportation-related tax revenues

VMT fees could provide a more direct and equitable funding mechanism for highways, ensuring that those who drive more pay in accordance with their usage. A VMT tax system could incentivize drivers to consider road utilization in their driving habits, leading to decreased congestion and lower maintenance costs.

The federal VMT tax rate, if differentiated based on vehicle weight per axle, would need to average 1.7 cents per mile to match the Highway Trust Fund’s expenditures, promoting fair contributions based on road usage and wear.

VMT Costs and Challenges

While the benefits of VMT fees are persuasive, it’s necessary to recognize the costs and obstacles involved in implementing this system. Creating a cost-effective design, minimizing privacy concerns, and securing public support are significant challenges that need to be addressed. The establishment of a VMT fee structure could entail substantial administrative costs and require extensive modifications to existing vehicle and fuel station infrastructure.

Analyzing administrative, collection, and compliance costs is crucial to ensure VMT fees are a viable alternative to contemporary systems like fuel taxes and tolls. Implementing VMT taxes on environmentally-friendly electric vehicles could face opposition, emphasizing the need for a system that accounts for environmental benefits while maintaining road infrastructure financing. Strategic planning for shifting to VMT fees includes analyzing the strengths and weaknesses of different implementation options, as outlined by the National Cooperative Highway Research Program.