Techniques for Assessing the Socio-Economic Effects of Vehicle Mileage Fees

Abstract

The purpose of this study was to develop tools for assessing the distributional effects of alternative highway user fees for light vehicles in Oregon. The analysis focused on a change from the current gasoline tax to a vehicle miles traveled (VMT) fee structure for collecting highway user fees. A static model and a regression model were developed and used to assess the impact of such a change on households by income and by location (rural/urban). A discrete-continuous choice model was explored for addressing the more complex issue of how the change in policy would affect vehicle choice decisions in the long run and the resultant distributional impacts. Results confirmed the regressive nature of the gasoline tax and showed that a change to a revenue neutral VMT fee of 1.2 cents per mile would result in a very small increase in regressivity (less than one percent for the lowest income group) in contrast to the five percent increase in regressivity caused by the increase in the price of gasoline between 2001 and 2006. The impact of a change to a VMT fee on rural areas was found to be opposite to that suggested by conventional wisdom. On average a household in a rural location would pay less under the revenue neutral VMT fee than under the gasoline tax, whereas those in urban areas would pay slightly more. Findings from the static and Ordinary Least Squares (OLS) models suggested that a change to a VMT fee is not likely to create a significant disincentive to purchase more fuel efficient or hybrid vehicles. The discrete-continuous model offered an appealing approach from a theoretical point of view to further address this question; however, the authors were not able to refine it enough to produce robust results. Given that the impact on income groups was virtually identical in both the static and the more complex OLS regression models, it may be best for policymakers to use the simpler model, as it is easier to explain.