Equitable and progressive distance-based user charges design and evaluation of income-based mileage fees in Maryland

Abstract

As a result of the declining purchasing power of fuel tax revenues, the Highway Trust Fund (HTF) is currently insufficient to maintain and expand the U.S. surface transportation system. Alternative revenue sources should be considered to address the insolvency of the current funding system. Mileage fees and value pricing have long been attractive options to researchers and decision-makers, but they often raise concerns of equity. This paper aims to design and evaluate equitable and progressive distance-based user fee policies, focusing specifically on income-based fee rate structures. In addition to equity, the policy design criteria must also include practicality, simplicity, revenue generation, and a consideration of the design's impact on surrounding jurisdictions. Three variable-rate vehicle-miles-traveled (VMT) fee scenarios with respect to income are introduced: Ramsey pricing, fixed-interval incremental, and fixed-percentage incremental structures. All policy scenarios are tested with a statewide transportation model in Maryland. Results show that income-based VMT fees can better protect lower-income households while generating additional revenue; however, a standard fee structure based on Ramsey pricing, or the inverse-elasticity rule, does not work as well as the fixed-interval incremental fee structure. The latter is progressive across all income groups while ensuring that equity and revenue goals are met.