Miles-driven Approach to Highway User Fees Shows Promise

January 14, 2008

Last month, Congress and President Bush approved a significant increase in auto fuel economy standards, the first in 32 years. The measure will boost mileage by 40 percent, to a fleet average of 35 miles per gallon by 2020.

While few would dispute the benefits of decreased emissions and less dependence on foreign oil, there also is a potential downside to the measure. As fuel economy increases, it erodes the primary source for funding highway maintenance and construction, the gasoline tax.

The gas tax generates revenue based on the volume of fuel consumed, while wear and tear on roadways is a function of miles traveled and vehicle weight. The Congressional Budget Office estimated there will be a $2.1 billion drain on the Highway Trust Fund between 2012 and 2017 resulting from the improved standards, and that source is already well short of meeting the nation’s highway funding needs.

Increasing fuel economy, along with the development of alternative fuel sources, has prompted some states to explore converting the traditional fuel tax to a miles-driven model. Oregon, for example, has undertaken a pilot program that employs GPS devices to track the mileage. The fee is automatically calculated and added to the cost when a motorist refuels, and the gas tax is subtracted.

GPS technology can differentiate between miles driven in one state versus another, and it also can determine the time of day in which a trip was taken. This could lead to a fee structure that would encourage drivers to shift to non-peak times, thus reducing traffic congestion.

“A miles-driven approach makes a lot of sense, and the technology is already here,” said PHIA President Ron Drnevich. “It more accurately and fairly reflects a motorist’s contribution to highway wear and tear, and it could help stabilize an important source of funding for our highway system.”

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