When you fill up at the pump, there’s always a sign showing how much of the price consists of dedicated state and federal road taxes. Well, that’s okay, you say. Somebody has to pay for the roads … who better than the folks who use them?

Indeed. But it isn’t nearly as simple as that. The wear and tear done by vehicles increases exponentially with weight, and fuel consumption is a very poor proxy for it – and getting worse all the time. Then there’s the reality that fuel tax revenues cover only a fraction of the federal government’s share of maintenance, leaving Congress to pony up from other sources. Here, I suggest a path toward syncing charges to users with the damage they do, beginning with trucks.

The Origin Story

The Highway Revenue Act of 1956 created the U.S. Highway Trust Fund to pay for the Interstate Highway System, the most ambitious public works program in U.S. history. The idea was to ensure that adequate funds were available to maintain and expand the U.S. roadways to make the system sustainable, and to divide the cost in a way that seemed fair in a rough and ready way.

The HTF is funded primarily through fuel taxes at a flat rate per quantity purchased, which Congress increased slowly from its inception to 18.4 cents per gallon for gasoline and 24.4 cents per gallon of diesel in 1993.

To keep the HTF solvent, Congress has periodically injected cash from the general fund. For example, in 2015 the Fixing America’s Surface Transportation (FAST) Act allocated $70 billion to the HTF. Then the JOBS Act in 2022 allocated $550 billion to help revive the nation’s transportation infrastructure, with $350 billion allocated to roads.

The federal government has been effectively subsidizing heavy users of the roadway system at the expense of light users and non-users. These subsidies of the road network have treated the network as a public good like, say, national defense, rather than one funded by the people or businesses that directly benefit.

Now, economists have long argued that the resulting inefficiency in pricing creates what is commonly referred to as the tragedy of the commons. The tragedy here is that a shared resource (roads) will be over-utilized in the sense that users at the margin will add more to maintenance costs than they pay. Individually rational users pursuing their own interests thus do so at the expense of the greater good, and the common pool resource is overutilized. This is surely the case with the U.S. highway network, which is plagued by congestion and substandard road conditions.

The problem has grown along with the need for public subsidy, with highway users paying a shrinking fraction of the total usage cost. The fact that vehicles have both become more fuel-efficient and are increasingly being powered by electricity (allowing EV owners to escape payment altogether) has added to the inefficiency and the revenue shortfall.

That’s where an alternative approach, the vehicle-mileage-traveled fee, fits in. The VMT is hardly a new idea: the economist Edward Manson put forth the notion in 1906 when just 33,000 cars were sold in the U.S., making reference to the fact that even the Romans implemented a usage-based road fee.

Much more recently (2009), the congressionally mandated National Surface Transportation Infrastructure Financing Commission recommended a VMT as a means of financing road infrastructure that would eventually replace the fuel tax. The CBO recommended a similar funding structure in an independent report that emphasized the disproportionate damage caused by trucks. (More on the latter below.)

Given the magnitude of the funding shortfall and the inherent inadequacy of the gasoline tax base, it’s plain that an alternative to paying at the pump needs to be found. I think the place to begin is to apply a VMT fee to trucks.

Starting with trucks makes sense for three reasons, all of which relate to the objections commonly raised to a VMT fee. First, although a healthy transportation network has some of the characteristics of a classic public good – society as a whole receives large benefits from the enhanced mobility it engenders – much of the savings from good roads accrue to the trucking industry and its business customers, which are, of course, profit-seeking private entities.

Second, because trucking is a commercial undertaking, the often-stated concern that the tracking of vehicles with electronic transponders needed to make a VMT viable would raise privacy issues doesn’t seem applicable. Commercial entities are subject to an entirely different set of privacy standards. Besides, the tracking and reporting of truck movements is already commonplace throughout the industry.

Third, beginning with trucks creates the most revenue with the lowest tracking cost. The trucking industry would be the most logical source to start recouping costs with a VMT fee since trucks do far more damage to pavement per vehicle-mile than cars. There is already an extensive system in place to track the movement of trucks – owners need the information in real time to manage efficient routes and loads while toll roads already use transponders to collect electronically – making the implementation of a VMT fee quite tractable. Finally, there are far fewer large trucks than passenger vehicles, allowing for much lower administrative costs per dollar of potential fee revenue.

The Cost of Inaction

Both drivers and engineers agree that the state of road infrastructure in the U.S. leaves something to be desired. The American Society of Civil Engineers provides an annual report card on the condition of U.S. roadways, finding that 43 percent of all roads are in mediocre or poor condition. With a backlog in maintenance and expansion projects approaching $800 billion, current spending levels would need to be increased by about 30 percent just to prevent the maintenance gap from growing.

Consider, too, that roadway safety has grown worse, with a 60 percent increase in fatalities from 2011 to 2021 in spite of increases in mandated auto safety features like lane-change warnings and automatic emergency braking. And while road conditions are only partly to blame, better infrastructure would make roads more forgiving of careless and aggressive driving. While we’re at it, don’t forget climate change: extreme weather is inexorably adding to road maintenance needs.

Of course, all this is taking place in the context of the growth in vehicle use. The Bureau of Transportation Statistics reports overall highway road mileage has increased 7 percent and highway lane-miles 10 percent since 1993, when the tax was last increased. More importantly, truck miles have increased by some 75 percent – that’s right, at least seven times as much as total road mileage.

Of course, the mismatch of supply and demand for road capacity has resulted in significantly more congestion. The American Society of Civil Engineers notes that congestion delays increased more than 25 percent between 2014 and 2021, and it estimates that congestion costs the nation $166 billion each year, or $1,000 annually in wasted time and fuel for the average auto commuter – not to mention adding to smog and greenhouse emissions, and reducing safety.

Trucks' Share of the Costs

The damage done by a vehicle to the road increases exponentially with weight – that is, other things equal, a 6,000-pound Cadillac Escalade exacts far more than twice the toll in road wear as a 3,000-pound Toyota Corolla. Indeed, in a now-famous, four-year study in the 1950s, the American Association of State Highway and Transportation Officials estimated that a 40-ton truck causes an astonishing 9,600 times more damage to pavement than a then-standard two-ton vehicle.

The external costs of trucking – that is, costs beyond drivers’ time, vehicle depreciation, maintenance and fuel – are fourfold: pavement damage, environmental degradation, congestion effects and the safety of other drivers. The Federal Highway Administration estimated that these external costs add up to as much as 70 cents per mile (no typo) for the heaviest trucks. Trucks account for 40 percent of federal highway costs, but provide only one-third of the Highway Trust Fund’s revenues.

A gap, though perhaps not as great as you expected? Remember that federal and state trust funds cover only a fraction of road depreciation and maintenance costs. All told, David Forkenbrock of the University of Iowa estimated back in 1999 that in order for trucks to compensate for all of the externalities imposed by the trucking industry, the fees they pay would need to triple.

The industry warns that if trucks were forced to pay more to use the nation’s roads, the costs would be passed through in the prices of myriad goods carried by the vehicles. But this is an oddly limited argument: the cost is now borne by taxpayers or just added to the accumulation in deferred road maintenance. Is that somehow better?

Moreover, this is not a zero-sum game in which a dollar of subsidy reduces consumer costs by a dollar. In a world in which trucks fully covered the external costs they generated, the relative cost of shipping by truck would rise, making it more attractive for long-haul shippers to switch to far more efficient rail. In a 2015 study, the Congressional Budget Office estimated that adding the unpriced external costs to the rates charged by both rail and truck – i.e., leveling the playing field – would shift 15 percent of truck freight to rail.

Follow the States

In an effort to reallocate the tax burden more fairly and to supplement the shrinking fuel tax base, several states have experimented with VMT fees, and a handful have applied them to heavy trucks.

• Oregon instituted a weight-mile fee to commercial operations on public roads for vehicles above 13 tons, with the fees ranging from 7 cents to 24 cents per mile.
• Kentucky charges a 2.8 cent per mile fee for all vehicles above 30 tons.
• New Mexico’s VMT fee begins at 13 tons at 1 cent per mile and grows to a maximum of 4.5 cents per mile for the heaviest trucks. The revenue, by the way, is nothing to sneeze at: the VMT fee constitutes 21 percent of the New Mexico State Road Fund’s revenue.

A balanced approach to structuring a federal VMT fee for trucking could be tailored to varying objectives related to which external costs of trucking you want to internalize: it could, for example, be limited to pavement damage or include everything from greenhouse gas emissions to road congestion. The objective of Congress might simply be to put the Highway Trust Fund in the black or to incentivize production of low (or no) emission trucks by tying the fee to tailpipe effluent.

It’s worth noting that if the goal is to speed the transition to low-carbon energy, fuel taxes would remain the efficient and direct means. So, in a multi-goal scenario in which the objective is to internalize several different externalities of truck usage, a mix of fuel taxes and VMT fees would make the most sense.

That said, I propose a VMT fee structure that both closes the highway funding gap and makes shipping more efficient by capturing the damages associated with distance, tonnage and the number of axles. The latter must be included because more axles distribute the weight to more surface points, which reduces the damage from a given total vehicle weight.

There are legal constraints that vary by state on the minimum number of axles allowable for trucks of various weights. But the most common policy is to allow two axles to bear up to 33,000 pounds, five axles (in tandem trucks, aka semi-trucks) from 33,000 to 80,000 pounds and six axles (tridem trucks) above 80,000 pounds.

The table on page 32 shows key data with basic VMT fee calculations. Walking through the calculation for combination trucks:

Total outlays in 2023 for the HTF (omitting mass transit) were $69 billion (line a).

Truck-trailer combination trucks – what people refer to as semi-trucks – are responsible for about 29 percent of the damagerelated outlays for highway maintenance and expansion expense (line b), which adds up to $20 billion (line c).

Total federal truck taxes in 2023 (diesel fuel and excise taxes) amounted to $17 billion (line f) with 59 percent of that coming from combination trucks, implying that the big trucks paid $10 billion less than their damage- related share.

In 2022 combination-truck miles in the U.S. totaled 157 billion (line g). This implies a 5.3 cent per mile shortfall between damage costs and heavy truck taxes (line k).

Applying the same methodology to smaller single-unit trucks yields a 3.2 cents per mile damage-revenue gap. Blending the two truck types leads to an overall average revenue gap of 4.6 cents per mile. So a VMT fee of 5.3 cents per mile for heavy trucks and 3.2 cents for lighter ones (to supplement the current fuel tax) would go a long way toward making federal highway funding sustainable without dipping into general revenues.

One caveat to this calculation: the appropriate tax per mile may be understated because the Federal Highway Administration has not conducted an analysis on road damage attributable to trucks since 1999. In the intervening years, average truck weight has grown by 15 percent. Meanwhile, as noted above, engineering studies show that the damage done to highway pavement by vehicles rises sharply and disproportionately with weight. In fact, it has been found that damage increases with the fourth power of weight. So doubling the load per axle increases damages 32-fold!

This implies that the efficient VMT fee would be far higher than our calculations. In any event, the table is based only on truckmiles and omits any direct consideration of truck weight, while an efficient user fee would be a function of axle weight. Given that combination trucks over 34,000 pounds generally operate on five axles, we assume that fewer axles are used at lower weights to reduce the acquisition, fuel and operating costs faced by the trucking industry.

Now, the Federal Highway Administration last reported on the weight distribution of trucks back in 2002. Assuming (quite plausibly) that the distribution of truck weight hasn’t changed drastically, we can integrate these weight distributions into the VMT calculations to create a charge per axle-ton-mile.

For single-unit trucks, this fee ranges from 0.1 cent to 18 cents per mile. For combination trucks, the VMT fee ranges from 1.4 to 20 cents. The single unit trucks’ fee increases by about 5.1 cents per 1,000 pounds, while the five-axle combination trucks’ fee increases by about 2.9 cents per 1,000 pounds.

The result of the analysis is a truck VMT fee that offsets the truck-deficit portion of the Highway Trust Fund in the future, preserving its economic viability. But, do remember that it doesn’t necessarily represent the full cost of the road damage done by heavy vehicles.

Why Now?

It almost goes without saying that the U.S. highway network is essential to the quality of life of Americans and to the health of the economy. But that could have been (and was) said about the United States 20 or 30 or 40 years ago to justify a VMT fee. What’s different?

Start with the fact that the highway maintenance gap continues to grow. Add the fact that paying for the system by the gallon of fuel sold is dependent on a shrinking tax base as fossil-fuel engines become more efficient and EVs offer the opportunity to avoid fuel taxes entirely.

Add, too, the fact that the idea of fees calibrated to the users of the services delivered (as opposed to new taxes) ought to appeal to a Congress controlled by conservatives.

Now factor in some political realities. First, a handful of states in desperate need of revenue have already broken the ice, overcoming trucking lobbies to impose VMT fees. Second, the federal cupboard is even barer than usual, with Washington running budget deficits of wartime proportions in a period of nearly full employment. And while the ultimate distributional burden of paying for roads with fees on trucks is not entirely clear, a VMT fee would sting less at this political moment than a broader-based increase in the fuel tax.

Well, if trucks are to be subject to fees, why not SUVs and cars? The mechanisms for collecting mileage fees from commercial trucks are proven and relatively cheap to administer, while generating substantial revenue per vehicle. The same can’t be said for the hundreds of millions of other vehicles on the road. In any event, trying to broaden the base to include lighter vehicles would make the VMT fee an even harder political lift, yet generate relatively small sums.

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In a country that demands higher-quality public services and doesn’t want to pay for them with taxes, something has to give. VMT fees represent a timely opportunity for raising badly needed revenues without distorting markets by charging the direct beneficiaries. Anybody have a better idea?