Minnesota highways: revenue sink or revenue source.

Abstract

This paper looks at VMT (vehicle miles traveled) fees along public finance principles, and considers the policy implications and potential revenue that could be generated if we took advantage of one of our most valuable resources: the highways. Instead of seeing highways and all roadways as a revenue sink, this thesis envisions them as a significant revenue source. Demand models for VMT both at the national and state level are estimated, and used to estimating the potential revenue that could be raised through VMT fees. This thesis explores the possibilities, both at the federal level and for the state of Minnesota, of using VMT fees to not only provide funds for the highways and other transportation purposes, but to also provide a significant revenue source for general funds. It is shown, that for relatively low and economically harmless VMT fee levels, great amounts of revenue could be raised. These revenues could not only fund the transportation system, but could save the state of Minnesota from harmful program cuts or tax increases, and could potentially help avert a fiscal crisis that could derail the United States‟ economic rebound.