Estimating Revenue-Neutral Mileage-Based Fees for Urban and Rural Households in Eight Western States

This paper focuses on one alternative source of revenue-a mileage-based user fee-as a potential substitute for the current gasoline excise tax. It examines one of many questions that arise when this source of funding is considered-the potential for differential financial effects on urban and rural households. The issue has been characterized as one of "equity," and more specifically whether rural households will pay a disproportionately greater share of the costs if states transition from a fuel-consumption-based to a mileage-based funding system. This paper presents an approach to address this question using existing sources of data and a set of assumptions designed to assess a "revenue-neutral" substitution of mileage-based charges for the current gasoline excise tax. Based on the methods used in this paper, it appears that rural households may, in fact, benefit from introduction of a mileage-based fee because they will pay less than under the current system in all states investigated for this study.