Imagining a transition to a VMT fee in Michigan

Last month, a transportation research center at the University of Michigan issued the results of its study, commissioned by the Michigan Environmental Council, of how that state might transition to a mileage fee to pay for transportation spending.

The 'options paper' is short, clear, and raises an interesting option for collecting a VMT fee.


Like other VMT fee advocates, the authors argue that a mileage tax is fairer than a gas tax because it charges road users directly for their impacts on the road system, without regards to vehicle efficiency.  I'm not sure that argument holds up well on the ground. A major contributor to fuel efficiency is the overall weight of the vehicle, and that also determines the damage a car does to the roadway as it passes over it.  If a VMT fee accounts for number of axles but not the difference in weight between, say, a hybrid and an SUV, the fee will tend to overcharge the lighter car.  Note that this a separate issue from the fuel efficiency itself - a revenue-neutral switch to a mileage fee will also penalize the owner of the more efficient vehicle.

But setting the fairness argument aside, the Michigan report explores some of the technologies that would allow regular payments of the tax, rather than having to gather it into a single, annual bill.  For example, the report suggests that if transponders are used to track mileage, they could share that data with receivers at gas stations, which would then fold the tax into the purchase price of the gas.  That pay-as-you-go approach may work much better than a lump-sum annual fee for a family with tight cash flow.

It would also help to minimize another effect I've been wondering about - whether shifting to a VMT fee would, perversely, induce extra driving.  Here's how that would work: for a set of drivers, cash on hand probably currently serves as an intuitive constraint - when the gas gets low, they drive less until the next paycheck.  A lowering of the gas tax, even if it is offset by a fiscally neutral VMT fee, would make the price of gas at the pump drop from say, $3.50/ gallon to $2.95/ gallon.  As a result, the budget-constrained drivers may suddenly drive more.  But that extra driving isn't free; it adds to the lump sum annual cost, making the hit even harder when it comes around.  Collection each time a driver pulls up to the pump would induce less extra driving.