Winners and Losers: Distributional Impacts of Highway User Fees. B. Starr McMullen Lei Zhang Kyle Nakahara Oregon State University. Case Study: Oregon Proposed change in highway user charges: From a Gasoline Tax to Vehicle mile fee.
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B. Starr McMullen
Oregon State University
Purpose of Tax: To Collect Road User Fees (We will not consider congestion fees here)
Intent: Revenue Neutral Fee
Intent: Revenue Neutral Fee
VMT tax set at $.012/mile to replace $.24/gallon gasoline tax ($.012 = $.24/20 mpg)
Replace gasoline tax with a Vehicle Mile Tax (VMT)
Between Income Groups
Between regions (urban/rural)
Identification important for decisions regarding
groups pay a progressively higher percent
of their income in fees
Suits Index based on Oregon static model of Income With Oregon Gasoline Tax of $.24
Suits Index= -0.17623
Suits Index based on Oregon static model gasoline tax to a $.012/mile VMT (2001) cont.
Suits Index= -0.22542
Static Model Alternative Policy 1: Gas Tax of $.24/gallon for vehicles with < 20 mpg ; VMT of $.012/mile for vehicles with mpg > 20 mpg (2001 gas prices)
Suits Index = -0.18493 for vehicles with < 20 mpg ; VMT of $.012/mile for vehicles with mpg
Alternative Policy 2: Step fee: a. MPG< median MPG pays 2 cents/mile; b. between median MPG and 20 MPG pays 1.5 cents/mile; c. MPG>20 pays 1 cent/mile
Suits Index = -0.16165 cents/mile; b. between median MPG and 20 MPG pays 1.5 cents/mile; c. MPG>20 pays 1 cent/mile
Once behavior changes by the consumer are considered
(movement along the demand curve), the relevant
measure of the change in welfare for consumers is the
change in consumer surplus (CS)—not simply the
change in tax revenue (TR)
For a tax increase, consumers may end up paying less in
taxes, but they may do so by driving less—and that
involves another loss
Dynamic Model 1: cents/mile; b. between median MPG and 20 MPG pays 1.5 cents/mile; c. MPG>20 pays 1 cent/mileOrdinary Least Square (OLS) Regression
To get dynamic response, we need a model that take into account the behavioral responses – which may differ by income group and by location
We first use an OLS model –
this gives an estimation of changes in vehicle use (i.e. changes in household vehicle miles traveled)
Italicized variables are logarithmic
Suits Index based on Oregon OLS model $.012/mile VMT: Alternative Policy 1 and Alternative Policy 2
Suits Index= -0.133 with gasoline tax
Suits Index =-0.142 with VMT = 1.2 cents/miles
Suits Index = -0.145 with Alternative Policy # 1
Suits Index = -1.111 with Alternative Policy #2
Do we really want greater reliance on non-user fees?
What effect would these taxes have on regressivity relative to the VMT and gas taxes?
VMT-fees may also be designed to achieve sustainability objectives, such as reducing fuel consumption, reducing greenhouse gas emissions, and encouraging the ownership of greener vehicles
Congestion pricing based on VMT-fee technology
VMT for congestion and environment in addition to gasoline tax?
This research was funded partially by ODOT and OTREC. The author would like to thank Alan Kirk, Jim Whitty, Betsy Imholt, Becky Knudson, Brian Gregor, Jack Svadlenak, Satvinder Sandhu, and Anthony Rufolo for their assistance. The authors are solely responsible for the opinions expressed here.
B. Starr McMullen Lei Zhang
The static model will overestimate the impact of a
tax increase, underestimate the impact of a tax
Static model assumes that the change in tax
revenues paid is the only impact that a tax
change will cause – a direct transfer from
consumer to the Government
Total change in revenue to agency from
Price increase = B-A;
Price decrease = A-B