New Debate about Vehicle Miles Travelled Fee

Recent weeks have seen renewed debate about how to pay for transportation investment. The National Financing Commission released a report recommending an increase in the gas tax and a transition in the next decade to a system based on vehicle miles travelled (VMT). Around the same time, Transportation Secretary LaHood commented that he was willing to consider a VMT charge as a revenue mechanism – a comment that the Obama administration quickly smacked down and backed away from. This was a surprising move that does little to advance a reasonable discussion of how to actually pay for transportation investment.

The basic issues, as we have partly laid out in previous posts, are these:

1. There is a popular myth that the public fully pays for transportation infrastructure via the gas tax. This is false. As the Finance Commission reports, people pay nowhere near the full direct and indirect costs of transportation.


2. Transportation infrastructure is not only deteriorating, it is not being used efficiently. Charging people more of the actual cost of their use can preclude the need for more investment. Either people pay upfront with higher fees, or they pay later through higher general or indirect taxes, and it is cheaper to pay upfront.


3. If we do not raise enough revenue through user fees like a VMT charge, we face the issue of whether to spend money from the general fund. This would be a foolish approach because it severs the connection between payment and use.


4. The gas tax is unsustainable. As the primary revenue source, in the short term it needs to be increased if we want to invest adequately in transportation. In the medium term (5-20 years), it needs to be phased out because changing technologies will limit the revenue it raises.

So we arrive at discussion of the VMT charge. The administration’s dismissal of a VMT charge flies in the face of broad consensus in the transportation sector. Without proposing an alternative revenue source, it seems that the administration either does not believe that more money should be invested in transportation, or that more investment should be paid for from the general fund. The first possibility is contradicted by the administration’s own emphasis in the stimulus bill of the public value of investing in transportation. The second possibility is simply poor policy.

At a time when the country needs to focus on efficient spending, a policy that funds transportation from the general fund is the most costly and least efficient approach. It voids the principle of “user pay” and ensures that transportation infrastructure will be used in the most inefficient way (i.e. continued traffic congestion).

It is not that a VMT charge is the only viable user fee available, but it is a logical and reasonable one. To dismiss it off the cuff without a discussion of the alternatives is to preempt a thoughtful debate of best practices. For those reasons, we have certainly not heard the last of a VMT charge.

Congressman LaHood and the Department of Transportation

During his career in the U.S. House of Representatives Congressman LaHood had a reputation for approaching public problems with an open and pragmatic mind.  I am confident that this attitude will translate into a willingness to consider significant reform in the transportation sector during his leadership of U.S. Department of Transportation.  Many necessary changes can only come through legislative action, but DOT can undertake administrative and regulatory changes to promote greater linkages between transportation policy, economic growth and competitiveness, energy security, and climate change. Addressing these issues, which are deeply interwoven with transportation policy areas, is essential in developing a forward-looking federal vision – and DOT can play an important role in this task.

There are a number of steps DOT can begin today to reform the system. Perhaps the most dramatic might be a reorganization of DOT’s structure along functional, rather than modal, lines. The leading example of such a departmental restructuring comes from the United Kingdom. The goal is to better align priorities, objectives, and process while reducing inefficiency and providing incentives for success. A restructuring would help clarify and consolidate the grant-making agencies within the DOT (like merging the highway and transit agencies into one) and the more regulatory-oriented agencies that deal with goals like safety. Within the limits of existing statute, the new Secretary might consider a reorganization of DOT around national goals and purposes, such as transportation in metropolitan regions, major trade and goods movement corridors, and intercity passenger connectivity.  In addition, the new Secretary might undertake – again, within existing law – a consolidation of the Department’s regulatory activities that deal with goals like safety.

DOT can lead in other areas as well. In focusing on energy security and environmental goals, Cong. LaHood, as Secretary, should begin the process of further increases in CAFE standards for all classes of vehicles and should direct DOT’s operating agencies to develop guidance to state, local, and metropolitan agencies that will encourage genuine strategic transportation planning and linkages between transportation, economic growth, energy, and climate change at those levels. To improve operations DOT can take action to enhance the role and capacity of the Bureau of Transportation Statistics to collect data critical to insuring performance and accountability; without better data it is hard to develop accountability much less set goals. DOT can also move to put a greater emphasis on operating improvements and restoration of existing assets and, to the extent possible under existing law, using DOT programs and authority to allow state and local governments to utilize pricing in the management of systems. 

Even if all of these goals cannot be fully accomplished in the next few years, a DOT focused on opportunistically moving the ball forward when possible will help to ensure that critical long-term concerns are advanced.