Income and Geographic Distribution of a Vehicle Miles Traveled Fee: Case Study of Four States

Abstract

The transportation sector in the United States has faced funding challenges owing to a stagnant federal fuel tax rate and rising vehicle fuel economy. To address this issue, policy makers have explored the potential of a vehicle miles traveled (VMT) fee as an alternative funding method. However, equity concerns remain across income and geographic groups. This study explored equity issues with a VMT fee for different income levels and two geographic groups (urban and rural), in four states (California [CA], Iowa [IA], New York [NY], and Texas [TX]). Using 2009 and 2017 National Household Travel Survey data, the study analyzed VMT demand elasticity using structural equation modeling and applied it to VMT fee scenarios. The results showed that the current fuel tax system charges higher-income and urban households more than lower-income and rural households, whereas the VMT fee system reduced these differences a small amount. Households in CA, IA, NY, and TX paid, on average, $10, $5, $2, and $2 less per year with the VMT fee, respectively, compared with the current fuel tax system. This is primarily since electric vehicles will also pay the VMT fee. Most importantly, the difference in the amount paid changed very little under a VMT fee for the different income and geographic traveler segments, potentially alleviating some equity concerns.