Comprehensive Equity Analysis of Mileage Based User Fees: Tazation and Expenditures for Roadways and Transit

Abstract

Lack of sustainable revenue generation for transportation infrastructure has created a need for alternative funding sources. The most prominent of which is the Mileage Based User Fee (MBUF), where drivers would be charged based on the number of miles they drive, thus holding them accountable for their use of the roadway. While numerous equity related issues have been addressed, the interrelation of transportation taxation and expenditures on all levels of government (State, County, and Local) is not well understood.

Using National Household Travel Survey data and information collected from over one hundred agencies, roadway taxation and expenditures were assigned to individual households in the Houston core based statistical area (CBSA). Using both Gini Coefficients and Theil Indices to analyze equity relationships, the research demonstrated that implementation of a MBUF would not have a pronounced effect on the current distribution of transportation taxation and expenditures, with the number of miles traveled and the total transit ridership remaining mostly unchanged. This also means that the equity of a MBUF is mostly equivalent to the current fuel tax. The relative winners of the current system are rural and high income urban households, while the relative losers are all other urban households.

Increasing the MBUF to meet the Texas 2030 Committee recommendations would decrease the average benefit to taxation ratio, causing households to receive less than they pay into the system. Additionally, it would decrease the total number of miles traveled by 22.8% and increase transit ridership by as much as 10.2%. Still, equity of this scenario changed little from the equity of the current transportation funding system. However, excluding public transit expenditures resulted in a statistically significant and undesirable change in the Gini Coefficient, indicating that public transit has a positive impact on equity when considering the transportation system as a whole.

Due to relatively flat rate taxes (vehicle registration, property tax, sales tax, etc.), the higher the miles driven, the lower the effective tax is per mile. When miles traveled are decreased by 22.8%, the effective tax per mile increases, which is the reason why the average benefit to taxation ratio was reduced. If transportation related taxation were to shift towards user based methods, then the benefit to taxation ratio should tend towards a value of one, indicating that all users receive exactly the value they pay for. If revenues are increased while the methods of taxation remain the same, low income urban households will be negatively impacted to the greatest degree.