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The Journal of the Trachtenberg School of Public Policy and Public Administration at The George Washington University


America’s transportation infrastructure faces three challenges: a shrinking Highway Trust Fund, poor physical conditions, and a need to shift to cleaner modes of transport. Despite these growing needs, the main tool used to fund transportation projects in the United States—the federal fuel taxes—have not been raised since 1993, even as inflation, improving fuel efficiency, and increasing electrification have chipped away at the tax yield (C. Davis 2021). Replacing federal fuel taxes with a vehicle-miles traveled (VMT) tax could both increase revenue for needed infrastructure projects and reduce VMT. This paper analyzes VMT taxes across four dimensions: administrative feasibility, behavioral distortion, revenue yield, and equity. It finds a consensus among researchers that VMT taxes can reduce driving, although they may also produce a substitution effect toward less fuel-efficient vehicles. They can provide adequate yield for governments and are as equitable as fuel taxes. On the fourth dimension—feasibility—VMT taxes appear to be somewhat less efficient for governments to collect, but advances in collection technology may solve that issue. This paper recommends that the federal government replace fuel taxes with a VMT tax and couple it with increased fuel-economy regulations or sales taxes on fuel-inefficient cars.

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