This paper focuses on one alternative source of revenue—a mileage-based user fee—as a potential substitute for the current gasoline excise tax. It examines one of many questions that arise when this source of funding is considered—the potential for differential financial effects on urban and rural households. The issue has been characterized as one of “equity,” and more specifically whether rural households will pay a disproportionately greater share of the costs if states transition from a fuel-consumption-based to a mileage-based funding system. This paper presents an approach to address this question using existing sources of data and a set of assumptions designed to assess a “revenue-neutral” substitution of mileage-based charges for the current gasoline excise tax. Based on the methods used in this paper, it appears that rural households may, in fact, benefit from introduction of a mileage-based fee because they will pay less than under the current system in all states investigated for this study.

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This paper explores the feasibility and sensitivity of a mileage-based road usage charge (RUC) as an alternative to the gas tax. The specific purpose is to evaluate factors that could be considered when setting a charge to account for the complex makeup of statewide motor fleets, and to consider the diversity of household driving behaviors and experiences. The researchers considered a range of potential parameters before choosing to focus on fuel type and fuel efficiency. If based on annually adjusted efficiency quantiles, a parameterized RUC could prevent revenue erosion over time. Formulas based on these parameters were compared with the current fuel excise tax and a flat RUC. Distributional effects of parameters were assessed for urban, mixed, and rural household categories, and for vehicles of different fuel types. Results show that households in urban tracts tend to pay slightly more under all formulations, and households in mixed and rural tracts pay less compared with an excise-based gas tax. In addition to changes across regions of a state, the method allows examination of the groups within these categories. Research found that adjusting for fuel efficiency reduced the change in incidence between urban, mixed, and rural census tracts, and between fuel types, that results from moving to a flat RUC. Fuel type parameters resulted in only small differences from the flat rate RUC because of low alternative fuel penetration in most states. This may change over time depending on the rate of integration of alternative fuels into the passenger car fleet.

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