EQUITABLE AND PROGRESSIVE DISTANCE-BASED USER CHARGE: DESIGN AND EVALUATION OF INCOME-BASED MILEAGE FEES IN MARYLAND

Abstract

Due to the declining purchasing power of fuel tax revenue, the Highway Trust Fund is insufficient to operate and maintain the surface transportation system in the U.S. Alternative sources of revenue, other than the fuel tax, should be considered to address the insolvency of the funding system. Mileage fees and value pricing have long been attractive options to researchers and decision-makers, but they often raise equity concerns. This paper aims to design and evaluate equitable and progressive distance-based user charge policies, and focuses specifically on income-based fee rate structures. Three variable-rate vehicle-miles traveled (VMT) fee scenarios with respect to income are introduced and all policy scenarios are tested with a statewide transportation model in Maryland. Results show that income-based VMT fees can well protect lower-income households while generating more revenue. However, a standard fee structure based on Ramsey pricing does not work as well as the fixed-percentage incremental fee structure. The latter is progressive across all income groups while ensuring that equity and revenue goals are met.