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Report hones in on vehicle mileage tax for future surface transportation funding
Monday, 08 February 2010 00:00

At a time when funding for the next surface transportation reauthorization remains in flux, coupled with an ongoing series of continuing resolutions to keep funding at its current levels, a report in the Washington Post raised the specter of future highway funding through a so-called vehicle mileage tax (VMT), as opposed to the current method of a fuel tax.

The fuel tax, which has not been raised since 1993, is comprised of an 18.4 cents per gallon fee for gasoline and 24.4 cents per gallon fee for diesel. VMT fees would be based on a federal funding system based on user charges through a charge for each mile driven and would be based more directly on miles driven and possibly also on time of day, type of road, and vehicle weight, and fuel economy, as opposed to indirectly on fuel consumed, according to a February 2009 report from the National Surface Transportation Infrastructure Financing Commission, a bi-partisan commission established by Congress charged with coming up with new financial payment methods to maintain and expand transportation infrastructure.

The Washington Post report quoted former Department of Transportation Secretary Mary E. Peters as telling a Senate subcommittee in 2008 that "the fuel tax is unsustainable in the future...virtually every economist who has studied transportation says the direct pricing of road use, similar to how other people pay for other utilities, holds far more promise...than do traditional gas taxes."

What's more, the Commission's report cited other reasons for fuel taxes not providing the needed financing to maintain U.S. surface transportation infrastructure, including how real highway spending per mile has fallen by nearly 50 percent since the federal Highway Trust Fund (HTF) was established in the 1950s, adding that the fuel tax is not adjusted for inflation and has experienced a cumulative 33 percent loss in purchasing power since 1993. On top of that, the report also noted that without changes to current policy, revenues raised by all levels of government for capital investment will total roughly one-third of the nearly $200 billion needed annually to maintain and improve the nation's highway and transit systems.

And, as the Washington Post report outlines, if fuel consumption drops 20 percent by 2017—a goal set by former President George W. Bush—gas tax revenue will also decline albeit as a quicker rate due to President Barack Obama's mandate that new cars get 35.5 miles on average per gallon by 2016.

"The direction you are going to see [going forward] is an emphasis on consumption-based pricing and the VMT is a form of that, as is tolling," said Michael A. Regan, CEO of transportation rate analysts TranzAct Technologies, in a 2009 interview with LM. "You are philosophically going to see a push towards a system that says the more you use the system the more you are going to pay to be in that system, and you cannot pay for it with the gas tax or fund a Highway Bill with it."

And unless major steps are taken to increase revenues for surface transportation funding, it is unlikely much will get accomplished on that front, according to Tom Donohue, CEO of the U.S. Chamber of Commerce. Donohue has previously stated that the U.S. needs "to quit fooling itself" when it comes to the motor fuels tax, explaining that without an increase it is likely that infrastructure and related funding issues will continue.

Logistics Management, 2/8/2010