Research & Commentary: States Testing Vehicle-Mileage Tax Programs

Published July 15, 2016

Several states – including Connecticut, Delaware, Pennsylvania, and New Hampshire – are applying for “$2.1 million in federal money to study so-called ‘mileage-based user fees,’ which would tax drivers based on the number of highway miles they drive.”

Lawmakers in recent years have placed a greater emphasis on developing alternative sources of revenue to pay for state transportation projects. Gas taxes have long been one of the primary ways for states to raise money for transportation, but they have proven to be unreliable. The increase of fuel-efficient vehicles has led to decreased revenues from motor-fuel taxes, which disproportionately shift the tax burden to low-income drivers, a group that typically owns older, less fuel-efficient vehicles. According to Americans for Prosperity, households with incomes of less than $50,000 per year currently spend more than 20 percent of their after-tax income on energy.

Jennifer Cohan, secretary of Delaware’s Department of Transportation, told The Washington Post in June states must move beyond gas taxes, stating, “Reliance on the gas tax as a major contributor to funding transportation is no longer a viable option.”

Oregon began a pilot program in July 2015 that taxes drivers “1.5 cents per-mile and … [refunds] any gas tax money [drivers have] paid.” The program attempted to find 5,000 volunteers to test the pilot, but it only had “855 active drivers and 1,015 active vehicles as of June 21[, 2016], according to Michelle Godfrey of the state’s Department of Transportation.”

California is launching a similar pilot program in July called the California Road Charge Pilot. It already has 5,000 volunteers participating in the nine-month study. The program in California does not require participants to purchase or use new equipment and offers several options for recording mileage. Drivers can use a time permit that allows for “unlimited road use for a specific period of time.” Another option is a mileage permit that allots a “certain number of miles.” Odometers may also be read periodically, and drivers are charged a fee on their per-mile usage. Mileage can also be tracked through “automated mileage reporting”—with or without general location data.

Opponents say they are concerned about potential violations of privacy; many say it’s not feasible to think governments can collect data on drivers without being too intrusive. Opponents also say government already collects plenty of taxes and that no new taxes should be imposed until spending is under control. Proponents argue a mileage tax will shift the tax burden to the people actually using the roads the most.

The evidence consistently shows Americans are unlikely to support gas-tax increases. A 2016 study by the Mineta Transportation Institute found only 31percent of respondents supported a proposed 10-cent gas-tax increase when offered “with no additional detail.” States will need to look elsewhere to cover transportation costs, and elected officials should pay close attention to the summary findings of the vehicle-mileage-tax pilot programs to determine whether these programs could offer a potential solution.

Before considering any new tax on gasoline or mileage states and the federal government should first spend all gas tax money on roads and related infrastructure and the federal government should distribute its gas tax revenues back to the states. States will have to explore more modern and efficient ways to fund road construction and traffic infrastructure, which should include privatizing roads and establishing toll systems. In several cities, transportation agencies are using congestion pricing—varying toll prices based on congestion—to manage demand and limit traffic problems.

The following documents offer more information on gas and vehicle-mileage taxes.

Alternatives to the Motor Fuel Tax 
This report, prepared by the Center for Urban Studies at Portland State University and submitted to the Oregon Department of Transportation, evaluates potential alternatives to motor-fuel taxes. The report also identifies the economic and technological problems that must be addressed when designing alternative revenue sources.  

Designing Alternatives to State Motor Fuel Taxes 
Writing in Transportation Quarterly, Anthony M. Rufolo and Robert L. Bertini consider the future of motor-fuel taxes as more fuel-efficient vehicles become available. They also report on the economic effects of road pricing as a substitute for fuel taxes.  

Paying at the Pump: Gasoline Taxes in America
Jonathan Williams argues gas taxes can be an effective means of funding transportation improvements. In many cases, however, governments exploit the taxes for political reasons, spending them on projects unrelated to roads and other transportation improvements.  

Gasoline Fuel Tax Rates as of January 2016
The American Road & Transportation Builders Association provides a map documenting state gasoline tax rates, using data from state Departments of Revenue. 

Road User Fees Instead of Fuel Taxes: The Quest for Political Acceptability
In this paper by Denvil Duncan, assistant professor at the Indiana University School of Public and Environmental Affairs (IUSPEA), and John Graham, the dean of IUSPEA, the authors examine how current societal and political trends in U.S. culture may lend themselves to increasing political acceptance of the possible implementation of mileage-based user fees to fund highway-infrastructure spending. 

Improving the Efficiency and Equity of Highway Funding and Management: The Role of VMT Charges
This working paper, written by Grove City College associate professor Tracy C. Miller, examines the role vehicle-mile charges could play in recreating how highways are funded and managed. Miller proposes that “charging drivers for their highway use and raising prices during congested periods would be a more effective way of allocating scarce highway capacity to those users who value it the most.” Miller concludes, “[V]ariable pricing could play an important role in eliminating the wasted time and fuel caused by congestion without the massive expansion in highway capacity that would otherwise be required. Without subsidies, user charges high enough to cover marginal costs would have the desirable effect of allocating scarce transportation inputs to their most urgent uses.” 

Research & Commentary: Congestion Traffic Pricing 
Congestion pricing, an alternative to gasoline taxes, uses market principles to address traffic congestion. Under congestion pricing, operators of a road charge a variable price based on congestion, allowing the operator to manage demand and limit congestion. Heartland Senior Policy Analyst Matthew Glans examines several proposals for implementing pricing systems to alleviate traffic congestion.   


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Budget & Tax News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database, at

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