VMT Taxation: A Modest Proposal

Alex Pazuchanics
Katie Ross
Randy Caruso
Lauren Pessoa
Introduction

• What is the current situation?

• The Highway Trust Fund is facing a serious shortfall

• Dipping into the general fund is not a viable solution in
the long run
Background

The current funding mechanism tends to provide the wrong

incentives.The overall goal of any proposal should be to price
usage of the system to encourage the most efficient use.
Solutions that have been proposed:
• Raising the Gas Tax (Politically difficult)
• Indexing the Gas Tax (May not keep pace with
inflation,Revenue stream will be unpredictable)
• Passing On Responsibility to the States
o Would only pass the buck, not solve the problem
All of these solutions require a great deal of political capital.
They do not deal with the overarching issue of making the tax
more equitable for those who drive less frequently.
Objectives

1. Secure Adequate Funding

2. Increase Use of Public Transportation
3. Establish a Clear Mission for the Highway Trust Fund
4. Utilize Low Cost, Low Technology, Low Overhead
Options
Geographic Scope

• Nationally regulated program

• Increase federal government role without overreaching into

state power
Technology Needs

Lowtech framework
• Creation of federal web-based database that tracks:
o vehicle license plate number
o state of registration
o vehicle identification number
o (VIN)
o odometer reading
Institutional Framework
• Federally-Licensed Sites
o Gas Stations, Auto Repair Shops,
DMVs
o Registration and licensing of garages
and other third-party sites to execute
Odometer reading

• Payment Kiosks
o installed in Reader Sites, DMVs and
Private Sector Businesses
• DMV Improvements
o Computer upgrades
Solution
• Annual Odometer Readings
o Individuals are taxed per mile, approximately $.026 per mile
(median) depending on vehicle weight
• Revenue generated will be nearly 100% of Federal
share of necessary funding
• States can add additional taxes (VMT or otherwise)
on their own for road improvements
• Taxes can be paid at the DMV or Federally licensed
participants in the private-sector.
How it Works

Step 1: Plan is Annonced

Step 2: Exisiting Motor Fuel Tax is increased temprarily

Step 3: Education Campaign is Launched

Step 4: First Odometer Reading

Step 5: Second Odometer Reading taken within the 12 month period

Step 6: The total amount of VMT tax owed is calculated and due within a month of the second reading
Critical Components
• Every car must be registered at
purchase
• If used car is sold,
responsibility for mileage
transfers owners
• Owners will pay for miles driven
at least once per year
• May be paid at owners
discretion (ie, monthly, at once)
Where is the money coming from?

Source: "2007 Highway Statistics" US Department of Transportation. Federal

Highway Administration. Table HF-10. February 2009.
Where is the money going?

Source: "2007 Highway Statistics" US Department of Transportation. Federal

Highway Administration. Table HF-10. February 2009.
What are the needs?

Source: "Paving Our Way: A New Framework for Transportation Finance"

National Surface Transportation Infrastructure Finance Commission. Exhibit
ES-2. February 2009.
Pricing our plan

Source: "2007 Highway Statistics" US Department of Transportation. Federal

Highway Administration. Table HF-10. February 2009.
Equity Issues

• Horizontal Equity- revenue seeks to maintain and improve

conditions of roads across the entire system

• Vertical Equity ( income and class)- A vehicle owner in a

family of four with a combined income less than $20,000 a
year would be able to write off the remainder of their tax for
any amount over $200 for the federal share of the tax.

• Vertical Equity (mobility and ability)-Those with special travel

constraints will face our solution with the same ease or
difficulty that driving on roads, completing registration and
yearly vehicle inspection mandates in the current system.
Large Scale Concerns
• Scope of Solution
o Does not address congestion directly but can be coupled
with congestion programs
• Large-Scale Enforcement
o Presence of foreign vehicles on American roads (check
odometer prior to entry and exit)
Political Consequences
o Taxes will be more reflective of the cost of service, which
necessitates an increase
o Can be offset by phased increase and tax rebates
Small Scale Concerns
• Odometer Fraud
• Stolen Cars
• Car-sharing systems, Company Cars
Conclusion

The solution we have proposed is far from perfect. We have

tried to acknowledge the deficiencies and compensate for them
as best we can. The solution that we have proposed meets our
objectives better than the alternatives, and therefore is the
strongest of complicated and imperfect options. An odometer
reading is a simple and effective way of solving at least some
of America's transportation funding issues.