President Ronald Reagan once observed that [o]ur countrys outstanding highway system was built on the user fee principlethat those who benefit from a use should share in its cost.[4] The technological developments, mentioned above, mean the time may have come for lawmakers to revisit who should pay for the roads, and how they should do so. That increases to $7/mph when speeding in a work or school zone and $8/mph when speeding in residential areas, plus an additional $200 in fees and costs. These increases do not happen in a vacuum and would hurt the economy as a whole as well as disproportionately tax the bottom quintiles of income earners. Launched on June 29, the DriveTU pilot program is being conducted by Transurban, the company that operates the I-95, 395, and 495 express lanes, in partnership with the Eastern Transportation Coalition, which represents 17 East Coast states, including Virginia, and D.C. The picture is slightly different when looking at federal tax collections, where rates have held constant in recent years. According to the CBO, a federal 5-cent per mile tax on commercial trucks would have raised between $4 billion and $13 billion in 2017 depending on type of trucks and roads taxed. [9] This includes both direct users like drivers, but also people who indirectly benefit from highways and road infrastructure (e.g., supply chains and transportation for goods and services), which would be reflected in market prices. Led by the DMV, a workgroup tasked with developing the program is slated to deliver an interim report to the Commonwealth thisDecember. Motorcycles get the lowest rate as they cause the least damage and contributes the least to congestion. The amount of state and local road spending covered by gas taxes, tolls, user fees, and user taxes varies widely among states. Surveys suggest there could be some hurdles to getting the general public to accept a mileage-based fee system, including skepticism of its fairness and privacy concerns. Examples include tobacco taxes, sugar taxes, and carbon taxes. ), Making sure that EVs are taxed appropriately for road usage would also make transportation taxes more equitable as access to expensive electric vehicles will no longer affect tax burdens. The efficiency increases because basing the tax rate on several parameters would incentivize drivers to drive only when the benefits of the drive outweigh the cost. Electric vehicles pay a flat fee ($88.20 in 2020) that reflects the 85 percent of amount paid in motor fuel taxes by an average Virginia driver. You can pay over time, as you drive, through the. The [49] Federal Highway Administration, Why Does the Interstate System Include Toll Facilities? Sept. 8, 2017, https://www.fhwa.dot.gov/infrastructure/tollroad.cfm. The first law of tax writing is that tax design choices have trade-offs. [26] U.S. Comptroller General, Excessive Truck Weight: An Expensive Burden We Can No Longer Support, July 16, 1979, 23, https://www.gao.gov/assets/130/127292.pdf. The only exceptions are Hawaii, Idaho, and Tennessee. 0000006515 00000 n Instead of using fuel as a proxy for road usage, taxing actual usage would better respect the benefit principle and guarantee that the tax acts as a user fee. According to the CBO, returns on private investment will be twice as large as federal investments. 0000004286 00000 n 0000000016 00000 n Since the VMT tax works as a user fee, a system to secure some transfers between states and localities would need to be developed. [27] Garrett Watson, How High are Other Nations Gas Taxes? Tax Foundation, May 2, 2019. Note: Revenue includes motor fuel taxes, motor vehicle taxes, and highway fees. According to the benefit principle, the people using the highway system should also pay for maintaining the highway system. [51] Ballotpedia, Arkansas Transportation Sales Tax Continuation Amendment (2020), accessed July 27, 2020, https://ballotpedia.org/Arkansas_Transportation_Sales_Tax_Continuation_Amendment_(2020). A good option to increase authorities expertise with the system would be to implement VMT taxes on commercial freight vehicles. [45] According to the CBO, a 1-cent increase in the gas tax increases revenue by $1.5 billion over 10 years. Questions? One of the biggest threats against the levy is electric vehicles (EVs) as these cars do not contribute to the state highway funds or the federal highway funds. This would allow gas stations to collect and remit VMT taxes similar to today, though it would require retrofitting vehicles in ways that could raise privacy and other legal concerns. Over the last dozen years highway funding has increasingly been paid for by the federal governments general fund. As shown in Figure 1,2 you paid much less tax in FY 2020 if you bought a used vehicle, averaging $283 per transaction, compared to $811 for a new vehicle purchase. Copyright 2018-2023 Local News Now LLC. xref This has the effect of reducing the value of a nations gas tax levy in American dollars, making reductions in gas taxes across the OECD look larger in magnitude than they were. [16] Additionally, MPG in new cars actually declined between 1985 and 2005. According to CBO estimates, the Highway Trust Fund will run out of money by the end of 2021 and the deficit is projected to be almost $70 billion over the first five years after the FAST Act funding expires. Drivers could opt into the voluntary system in lieu of paying a mandatory highway use fee that first took effect on July 1, 2020. The problem with a simple solution is that a simple rate per VMT severely limits the ability of the tax to properly target the tax beyond simple VMT and weight per axle. A VMT tax could be implemented by either levying a flat fee per VMT or developing an advanced tracking system with different rates for different locations. Use The Toll Calculator For A Specific Trip Toll Calculator Otherwise, if you are traveling the full length of the Chesapeake Expressway, these tolls currently apply for the following vehicle classes: Toll as of May 1, 2021. 4. [40]United States v. Jones, 565 U.S. 400 (2012), https://supreme.justia.com/cases/federal/us/565/400/. [47] A P3 is an alternative to traditional public funding of transportation projects in which a local, state, or federal agency partners with a private company to take funding in exchange for a new revenue source. Road damage increases with weight of a vehicle but decreases based on the number of axles. Taxes targeting market activity that generate negative externalities are called Pigouvian taxes. 0000004173 00000 n The changes, which include tying the gas tax rate to the Consumer Price Index to keep up with inflation starting next year, will help Virginia diversify its funding sources to offset stagnant or declining gas tax revenue, state legislators say. There has sometimes been resistance to taxes on EVs on the grounds that they are environmentally preferable to traditional gas-powered vehicles and thus create fewer externalities. [21] This example only accounts for passenger cars traveling on public roads and highways. This is an example of differentiation based on certain assumptions and could be refined further. WebIn addition to a vehicles combined MPG rating, two other factors are considered when calculating highway use fees: (1) the fuels tax rate at the time the vehicle is Source: U.S. Census Bureau; Federal Highway Administration; authors calculations. 3. Click to share on Facebook (Opens in new window), Click to share on Twitter (Opens in new window), Parents group files recall petition against Dranesville District school board member, Center for Transportation Public-Private Partnership Policy, instructions how to enable JavaScript in your web browser, Bijan Ghaisars family settles civil suit over five years after fatal shooting by Park Police, FCPD: Woman arrested for abducting 3-year-old at Tysons Corner Center, Live Fairfax: Top 5 date nights (or day dates) on a budget in Fairfax County. [31], This is an example of one issue with VMT taxes: they could prove to be very expensive to administer and enforce. Developing an equitable and effective VMT tax will be no small feat, though. 867 0 obj <> endobj If a state is alone in levying a VMT tax, a number of other issues appear. The actual rate per vehicle should be differentiated based on weight per axle. This is, however, not the case, as shown in Table 3: Almost every state spends more on highways than they collect in dedicated revenue from federal, state, and local sources. In 1994, the first year after the latest federal tax hike, a passenger car averaged 20.7 MPG and drivers paid 3.2 cents in taxes per VMT. This recurring column is sponsored and written bySharmane MedarisofMcEnearney Associates. [6], Diesel fuel is taxed at 24.3 cents per gallon at the federal level and at a combined (all state and local taxes) rate of 37.5 cents at the state level. In Virginia, as of July 1, a highway use fee (HUF) is now levied on fuel-efficient vehicles (fuel economy of 25 MPG or greater) and electric motor vehicles. However, it seems JavaScript is either disabled or not supported by your browser. 0000006132 00000 n Figure 8 is a map showing the percentage of state highway spending that could be covered by dedicated funds. For a VMT tax, the choices will be between a simple but less effective tax and a complex but more effective tax. Implementing a rate schedule as in Table 2 would represent a tax increase on consumers and businesses, since it is calculated to cover all transportation funding, which current transportation taxes fail to do. Tax revenues per vehicle mile traveled (VMT) are decreasing in real terms while expenditures are increasing in real terms. U.S. states apportion business profits based on some combination of the percentage of company property, payroll, and sales located within their borders. If you need help with the Public File, call 540-512-1558. trailer 0000004059 00000 n For a truly long-term solution to fund highway spending in the United States, policymakers should consider alternatives to simply raising the motor fuel tax rate or figure out a way to lower overall costs. A simple fee per VMT would not be equal across all vehicle types as it should be differentiated based on weight and number of axles. As a 501(c)(3) nonprofit, we depend on the generosity of individuals like you. Use the US Toll Calculator App! While 36 states have increased motor fuel tax rates over the last decade, the federal government has not updated the gas tax since 1993. Calculate speeding fine. States have an added complication regarding out-of-state drivers if no federal system exists.
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