US Should Switch to Vehicle Mileage Tax

October 4, 2016 Taxation in USA

Taxes on PetrolWASHINGTON D.C. State tax authorities in the USA could greatly boost their tax revenues by switching to a vehicle mileage tax.

An upcoming study to be released in the journal Transport Policy has indicated that most states in the USA will see a reduction in their revenues from taxes on fuel and diesel, unless they switch to a system of a vehicle mileage tax.

Currently state governments levy a fixed rate of excise tax on each gallon of gasoline sold.

However, due to the effects of inflation and the increasing efficiency of consumer vehicles means that the revenue gathered from excise duties has fallen by 31 percent between 1997 and 2012.

Further, if the same excise system is kept into the future, then between 2015 and 2040 the revenues will decline by 50.5 percent.

If the rate of the excise duty was pegged to inflation, then the decrease in tax revenues over the same time period would fall between 3.4 percent and 16 percent.

However, if the tax system were to be transformed into a vehicle mileage fee, then the tax revenues across each state could rise by between 54 percent and 101 percent, with a median increase of 62 percent.