Fuel taxes are no longer a good way of funding the transportation system. With increasing fuel efficiency and new fuels powering transportation, the fuel tax as we know it is not sustainable. Two national commissions set up by the U.S. Congress recommended replacing fuel taxes with a distance-based system of user fees, also known as mileage based user fees (MBUFs). The problem is that switching to anything else poses a host of transitional issues, from technology to the concern that this is a back door tax increase to “Big Brother” concerns. On the plus side, its fairness as a user fee related to the amount of use, in large part, is evident when the public looks at the growing number of electric vehicles that pay no fuel tax.
A new report from the University of Minnesota, From Fuel Taxes to Mileage-Based User Fees: Rationale, Technology, and Transitional Issues, examines the fuel tax and the MBUF on the basis of transportation finance principles of efficiency, equity, revenue adequate and sustainability, environmental sustainability and feasibility. The report suggests a transitional option, with a base fuel tax component and a mileage based charge component. The fuel tax component would operate at the federal and state level, while the mileage based component would also include a local option that would “replace the patchwork of local sales taxes that are used to fund local roads.” The hybrid system would allow the two systems to co-exist for a transitional period while mileage based user fees gain public understanding and acceptance and while technology and policy issues are worked out. The report sets the stage for a policy discussion on user fees and lays the groundwork for public outreach.