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Open Access Publications from the University of California

Equity and Mileage-Based User Fees: An Analysis of the Equity Implications of Mileage-Based User Fees Compared to the Gas Tax in the SCAG Region

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California has set goals to reduce greenhouse gas emissions, prompting stakeholders in the transportation sector to research ways to reduce vehicle miles of travel (VMT) through possible pricing strategies to incentivize less driving. The current transportation funding mechanism relies on the state gas tax. This tax is not a sustainable source of revenue since increases in the fuel economy of vehicles—absent an increase in the tax—will reduce revenue generation. One potential strategy for resolving this is a mileage-based user fee, also called a VMT fee. Rather than taxing the use of gasoline, a VMT fee directly taxes driving based on the number of miles driven. The Southern California Association of Governments (SCAG) is interested in understanding the equity implications of adopting a VMT tax since one concern that needs to be addressed before introducing a VMT fee is how the program might affect low-income drivers. This study draws on data from the 2017 National Household Travel Survey to estimate the effects of a mileage-based user fee compared to the current gas tax system on drivers by income in the SCAG region. Overall, all households would experience a tax cost increase under the 2.5 cents per mile fee tax scheme, but the increase would vary by household location and income group. Higher-income households would experience a greater increase in their total tax, but only a 0.03 percent increase relative to their income. Low-income households on average would pay 0.1 percent more of their income under the VMT tax.

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