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An equity analysis of fuel tax and VMT fee based on the revenue-neutral principle

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  • Shunfeng Song
  • Grace L. Morris
  • Zong Tian

Abstract

Facing the challenges of the existing fuel tax system to sustainably support future transportation needs in the states, scholars and government officials are studying a vehicle miles travelled (VMT) fee system to replace or supplement the current fuel tax system. As is often the case with policy changes, concerns over the distributional impact of the VMT fee have been voiced by groups, especially those representing low-income households. Using the 2009 National Household Travel Survey, we calculate and compare the fuel tax and VMT fee that each household is paying or would pay if the revenue-neutral principle is applied, examine the burdens of the fuel tax and a VMT fee, and estimate the change from paying the fuel tax to paying a VMT fee. Our empirical results show that a revenue-neutral VMT fee would on average produce small income redistribution from the rich to the poor.

Suggested Citation

  • Shunfeng Song & Grace L. Morris & Zong Tian, 2015. "An equity analysis of fuel tax and VMT fee based on the revenue-neutral principle," International Journal of Engineering Management and Economics, Inderscience Enterprises Ltd, vol. 5(3/4), pages 245-257.
  • Handle: RePEc:ids:ijemec:v:5:y:2015:i:3/4:p:245-257
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