Friday, October 23, 2026

Mileage-based user fees: Lessons from state programs

 Reason Foundation  

"Mileage-based user fees restore the users-pay, users-benefit relationship disrupted by electric vehicles by charging drivers based on the miles they actually drive."


"The fuel tax remains an exceptionally efficient revenue stream, collected at the wholesale and distributor level at a range of 1% to 5% of revenue, but its base is eroding.
"The fuel tax remains an exceptionally efficient revenue stream, collected at the wholesale and distributor level at a range of 1% to 5% of revenue, but its base is eroding.
"Average new vehicle fuel economy in the United States has increased by nearly 19% in two decades, and states are starting to feel the impact on their transportation budgets. States that have indexed their fuel tax rates to inflation or other variables have slowed but not stopped that decline. Electric vehicle adoption removes the relationship between road use and fuel tax payments entirely for a share of the fleet that grows each year, allowing electric vehicles to degrade roadways through use without paying for road maintenance, repair, and construction.
"A mileage-based user fee (MBUF) restores that users-pay/users-benefit relationship by charging drivers based on the miles they actually drive. The design challenge is no longer finding a replacement; it’s making the replacement viable financially.
"The Congressional Research Service estimates current mileage-based user fee programs cost anywhere from 5% to 13% of collections. None of the four permanent programs evaluated in this study have demonstrated administrative cost parity with the fuel tax, but the patterns these programs have shown can help lower the costs still. Scale lowers per-vehicle administrative cost, simpler mileage reporting options (MROs) require less back-end administration and cost less to replace, and programs that leverage existing touchpoints rather than building new infrastructure start from a lower cost base.
"The next decade of operating data from Utah, Oregon, Virginia, and Hawaii will determine whether mileage-based user fees can meet the standard the fuel tax has set, or whether collection costs remain the central obstacle to making them a viable replacement.
"The four permanent MBUF programs in the United States have, collectively, just over two decades of operating data. Three of the four programs have been running for five years or fewer. That is a thin base to draw definitive policy conclusions from, but the patterns that have emerged over those years of operation are consistent enough to guide states that are designing their own permanent MBUF programs or looking to evaluate best practices for reforming existing ones." . . .  More.

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