Despite the large social benefits from PAYD, there are currently several barriers to its widespread adoption, including the cost to monitor miles traveled and some state insur- ance regulations. In order to facilitate the spread of PAYD, we propose a three-part strat- egy. First, states should pass legislation permitting mileage-based insurance premiums. Second, the federal government should increase the funding available to PAYD pilot pro- grams by $15 million over five years. Finally, since the monitoring costs may exceed the expected benefit of PAYD to insurance firms but are much smaller than the social benefit, the federal government should offer a $100 tax.
