NCPA - National Center for Policy Analysis

Reducing Congestion with Vehicle Mileage Taxes

March 5, 2014

Replacing fuel taxes with vehicle mile charges would eliminate traffic congestion and improve transportation funding, says Tracy Miller, an associate professor of economics at Grove City College.

Gasoline taxes have become an inadequate means of funding transportation infrastructure, and revenue from the tax has shrunk as fuel economy has grown. Traffic congestion is a problem in many cities and increasing road capacity has only lowered the cost of driving during peak times, so rush hour congestion has remained a problem.

But transitioning from a fuel tax to a vehicle mileage tax would solve a number of problems. A simple mileage-based fee would be uniform for all drivers, though it could vary based on vehicle weight. But a more complex system would take into account congestion, charging drivers more for driving at peak times.

  • Currently, the fuel tax system does nothing to provide legislators with information as to which highways they should invest in. But a per-mile tax would earn revenue based on how much each driver uses a particular roadway.
  • Charging based on peak driving times would lessen congestion by giving drivers an incentive to drive less during those hours.

Privacy, however, is a concern when mileage fees are based on when and where an individual drives. Who would record this information and have access to it? Miller says that these concerns could be eliminated by including an onboard device within the car that calculates charges and accepts payment. Or, variable pricing could only be applied to certain highways and drivers could choose alternate routes to preserve their privacy.

Replacing the gas tax with a mileage tax would raise the costs of driving for many; however, it would also reduce the amount of time and fuel wasted due to rush hour congestion.

Source: Tracy C. Miller, "Improving the Efficiency and Equity of Highway Funding and Management: The Role of VMT Charges," Mercatus Center, February 22, 2014.


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