	Introduction

Federal highway and public transportation programs are funded mainly by taxes on motor fuel that flow into the Highway Trust Fund (HTF). The tax rates, set on a per-gallon basis, have not been raised since 1993, and motor fuel tax receipts have been insufficient to support the transportation programs authorized by Congress since FY2008. Increases in vehicle fuel efficiency and wider use of electric vehicles raise questions about the long-term viability of motor fuel taxes as a means of funding surface transportation. Economists have long favored mileage-based user charges as an alternative source of highway funding. Under the user charge concept, motorists would pay fees based on distance driven and, perhaps, on other costs of road use, such as wear and tear on roads, traffic congestion, and air pollution. How Road User Charges Might Work

A road user charge system would involve assessing owners of individual vehicles on a per-mile basis for the distance the vehicle is driven. Most studies of road use charging envision a single national system that would distribute revenue to the HTF and directly to the states, which currently impose their own taxes on motor fuels for transportation purposes. Pay at the Pump

A different approach to distance-based user charges would mimic the way Americans now pay their fuel taxes. The participant received a receipt, printed at the pump, specifying the cost of fuel and the user charge. No information on the vehicle's location is collected. The road user charge would reverse this by taking a small and simple tax administration problem and making it large: A mileage-based road user charge that encompasses all private vehicles could require as many as 256 million points of collection. However, experience in the United States and other countries suggests that the administrative and enforcement costs of collecting user fees would be in the range of 5% to 13% of collections. Section 6020 of the FAST Act authorized $95 million over the life of the bill to provide grants to states to "demonstrate user-based alternative revenue mechanisms that utilize a user fee structure to maintaining the long term solvency of the Highway Trust Fund." State-Level Experiments

Several states have conducted trials of mileage-based road user charge systems. Foreign Use of Mileage-Based Road User Charges

A number of foreign countries have imposed distance-based road user charges. Although proposals have been made in some European countries to bring automobiles under mileage-based road user charges, no such measures have been implemented to date.
A mileage-based road user charge would involve assessing owners of individual vehicles on a per-mile basis for the distance the vehicle is driven. Currently, federal highway and public transportation programs are funded mainly by motor fuel tax receipts that flow into the Highway Trust Fund (HTF). The tax rates, set on a per-gallon basis, have not been raised since 1993, and receipts have been insufficient to support the transportation programs authorized by Congress since FY2008. The long-term viability of motor fuels taxes is also questionable because of increasing vehicle fuel efficiency and the wider use of electric vehicles. Economists have favored the use of mileage-based user charges as an alternative to motor fuels taxes to support highway funding. Congress, in Section 6020 of the Fixing America's Surface Transportation Act (FAST Act; P.L. 114-94), provided $95 million to fund large-scale pilot studies by states or groups of states to demonstrate "user-based revenue systems" to maintain the solvency of the HTF.
Under this user charge concept, motorists would pay based on distance driven and, perhaps, other costs of road use, such as wear and tear on roads, traffic congestion, and air pollution. Mileage-based road user charges could range from a flat cent per mile charge based on a simple odometer reading to a variable charge based on a global positioning system (GPS). Other proposals envision mileage-based road user charges that would mimic the way Americans now pay their fuel taxes by collecting the charge at the pump. Most road user charge systems would require electric vehicle users to pay for their use of the roads. Charging by the mile could in itself provide an incentive to drive less. Such a reaction would reduce revenue, however.
Implementation of a mileage-based road user charge would have to overcome a number of potential disadvantages relative to the motor fuels tax, including public concern about personal privacy; the higher costs to establish, collect, and enforce (estimates range from 5% to 13% of collections); the administrative challenge of the billing process given the size of the private vehicle fleet (estimated at roughly 256 million vehicles or points of collection); and the setting and adjusting of the road user charge rates, which would likely face as much opposition as increasing the motor fuels taxes.
Experiments with road user charges have been conducted in the United States. Although useful, most of these have been small-scale experiments done at the state or local level. Other countries have implemented full-scale road user charge systems that offer more information on the potential costs and benefits. These include road user charges on trucks in Germany, Switzerland, and Austria, as well as charges on both trucks and automobiles in New Zealand.