Administrative Costs
Contrary to what many may assume, the fuel tax isn’t collected at the retail pump. Rather, it’s assessed at the wholesale terminal rack. That’s a critical distinction, because it requires the federal government to only collect the tax from the roughly 270 entities who operate these wholesale facilities across the country. With so few collection points, the result is an extremely efficient system with administrative costs of less than 1% (.02 cents on the dollar). In other words, more than $.99 of every dollar paid in fuel taxes goes straight to the intended purpose of funding road and bridge maintenance.
A national VMT tax program, on the other hand, will move fuel tax revenue collection to 272 million individual
offer some clues. In Oregon, which is home to the most advanced VMT tax program in the U.S., third-party companies are authorized to keep 40% of gross per-mile payments to cover their overhead. That means less than 60 cents of every dollar motorists pay are actually going to road and bridge maintenance.
Scaling such a program up to the national level could likely bring administrative costs down to the range of 10% to 20%. But even so, those costs would be hundreds of times greater than the current fuel tax.
Evasion and Noncompliance
An added benefit of the fuel tax is that it’s virtually impossible for motorists to evade. That wouldn’t be the case with VMT. With such a large number of vehicles to track, evasion would be a major challenge, requiring an enormous bureaucracy to catch, deter, and prosecute evaders. From ATRI:
To ensure compliance, strict terms-of-service agreements between road users and VMT tax administrators will be required with a clear process for addressing those who do not pay. For non-payers, a legal process will be needed for collecting monies owed, with the potential for civil or criminal prosecution. The associated costs to law enforcement and the judicial system are unknown but must be calculated and accrued.
vehicle accounts. For each of the 270 federal fuel tax payers today, a national VMT system will require tracking and taxing 1 million motorists. Not to mention that collecting revenue from a mobile and remote user group is far more complex than collecting at a fixed point of sale.
While there’s little existing research to definitively quantify what the administrative costs of a national VMT would be, the National Academy of Sciences reports that “there are no ‘low cost’ options that can be easily verified and enforced.” State-based VMT pilot programs
The report looks at the New York City Department of Finance’s efforts to collect unpaid parking tickets as a real-world demonstration, albeit on a much smaller scale:
The DOF uses two collection agencies, a primary collection agency and a secondary collection agency if the primary is unsuccessful. From 2016 through 2018, the DOF paid commissions of $5.5 million to its primary collection agency to collect $114 million. During that same period, the DOF paid $2.6 million in commissions to its secondary collection agency for
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