Stateline Story

Can Taxing Trucks by the Mile Help Save Transportation Funding?

  • August 25, 2011
  • By Daniel C. Vock
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As taxing fuel by the gallon becomes less effective, one alternative is to charge drivers by how many miles they drive. It is an idea probably too complicated right now to use for cars, but researchers are looking at using it for trucks instead.

Transportation researcher Richard Mudge is looking for ways to make sure states can afford to fix and build roads and bridges, even as gas taxes become less effective. Like other experts, he wants to start taxing vehicles for how far they drive, instead of the current system based on how much gas they use. The difference is that Mudge wants to start using the system on trucks, not cars. 

Fuel taxes, levied by states and the federal government, provide most of the revenue for fixing and building the country's roads and bridges. But taxing fuel by the gallon is becoming an unreliable way to raise money. That is partially because politicians do not want to raise the taxes, even by a few pennies a gallon. It is also because increasingly fuel-efficient vehicles are using less gas; the new breed of electric cars do not use any gas at all.

That is one reason why researchers like Mudge are exploring the alternative of charging drivers by vehicle-miles traveled, called "VMT" in industry shorthand. Previous experiments found many problems with using that system for cars: It requires drivers to install new equipment; drivers do not like the state following their travels; and it just cost too much.

But most of those problems are not an issue with trucks, says Mudge, who recently finished a study with trucking companies in New York state to test the idea. Many trucks are already equipped with off-the-shelf satellite navigation devices that are relatively cheap. Privacy is less of a concern, because truck drivers are on the clock. And trucking companies must already report their mileage to government regulators.

Plus, Mudge says, a fee on how far trucks drive could make life easier for truckers. "There's six or seven taxes that a typical trucker has to pay. And there's more if they're driving in 10 different states. There's a fair amount of paperwork there," says Mudge, a vice president of Delcan Corporation, which consults on infrastructure. "One advantage of a VMT fee would be that there is one fee, so it is simpler."

Benefit to truckers?

To determine how practical that fee would be, Mudge and his fellow researchers focused on New York's existing registration fees, fuel taxes and fees that charge trucks based on how heavy they are and how far they travel. Their goal was to make sure that the new system collected the same amount of money that the state takes in with those fees now, or about $450 million a year.

As part of the experiment, researchers came up with three different pricing schemes for the mileage tax. The first one would simply charge a basic fee per mile traveled. A second would also charge truckers lower rates for taking highways designed to handle trucks, and higher rates for taking local roads. The third set-up would give discounts to trucks that traveled during off-peak hours, to try to cut down on traffic jams.

The trucking companies all preferred the first and simplest of those options, even though it would cost many of them more than the more complicated formulas. Fewer headaches, they argued, were worth the extra costs. "They were interested in something that was very simple," Mudge says.

Kendra Adams, executive director of the New York State Motor Truck Association, says the possibility that a per-mile tax could include congestion pricing and other variables makes it less attractive. Even New York's current "weight-distance tax," which the group has lobbied to repeal for years, does not include those variables, she noted.

"We're very opposed to that kind of concept, primarily because trucks don't always choose what time they are on the road," Adams says. "Their schedules are based on when their deliveries are scheduled or when their pick-ups are scheduled."

New York is one of only four states that use a weight-distance tax. The rest of the states rely on truck registration and fuel taxes instead. The trucking industry has pushed hard for that change. It convinced 20 states to stop using weight-distance taxes, arguing that it is too cumbersome.

But truckers must still keep track of the miles they drive. An arrangement among all 48 contiguous states and the Canadian provinces requires truckers to report where they logged their miles. That information is used to redistribute tax money among states so that, for instance, New York gets money if a trucker spends all his time driving in New York but buys his gas in New Jersey.

The New York trucking group is also concerned that the new mileage tax Mudge proposes, like the existing weight-distance tax, would be more expensive to administer than a straightforward gas tax. That would mean less of the money collected would go to improving roads.

"The beauty of a fuel tax is that it is collected at the pump," Adams says. "There is no requirement for the IRS or the state to have to go to each individual payer to collect that money." But in order for the state to operate a mileage-based fee, Adams says, it would need administrators to run the program, auditors to make sure people were complying and staff to go after scofflaws who did not pay the taxes they owed.

Mudge admits that the mileage tax is slightly more expensive than a fuel tax to administer. It would cost between 2 percent and 5 percent of revenues, compared with 1 percent for fuel taxes. But other transportation revenue sources New York relies on are even more expensive to administer. For example, 18 cents of every dollar from registration of vehicles goes toward collecting the fees. Tollways take between one-fifth and one-third of their revenue to run.

Bob Pitcher, vice president of the American Trucking Associations, told industry experts at an April conference  that lawmakers should focus on revamping taxes for cars, not trucks. More cars are using electric and hybrid engines, which makes the gasoline tax less effective. Trucks, on the other hand, are still largely reliant on diesel fuel, he pointed out.

Extra revenues?

Mudge's study concluded that New York loses more than $200 million a year, because truckers do not pay the state all of what they owe. That reflects a national problem of underreporting mileage, but it could be especially big in New York because of its high fees.

The alternative proposed by Mudge's group could cut down on underreporting and fraud, because it would depend on GPS devices that would more accurately report where a truck had been. According to Mudge, several trucking company officials said they would even be willing to pay more money in taxes, as long as that money was used to improving the area's roads.

But Adams, from the New York trucking group, is skeptical. She says certain truckers would evade the new system, just like they do the current one. A better way to bring more revenue in to the state is to eliminate the weight-distance fee and depend more heavily on registration and fuel fees, she argues. Then interstate truckers would have less incentive to lie about where they drove in order to avoid high taxes.

"We are not ignoring the fact that there is an infrastructure funding issue out there," Adams says, "but we need to look at … what makes the most sense."