For decades, fuel taxes have provided a reliable source of funding to state departments of transportation (DOTs). Many consumers don't give much thought to paying fuel taxes and, according to public polling, can't accurately pinpoint how much they pay in fuel taxes. While this format contributed to sustainable funding for the maintenance and development of transportation infrastructure for much of the internal combustion engine era, times are changing.
The federal fuel tax has not been increased since 1993, and inflation since that time has significantly changed the cost of materials for repairing and building roads. Additionally, the advent of electric vehicles (EV) and increased fuel efficiency of fossil fuel-powered vehicles means that cars are now traveling farther on less fuel, reducing the revenue previously gathered through the fuel tax.
Today, state and federal lawmakers are working to find a solution that will provide continued funding for road improvements in this new era. Road usage charges (RUC), vehicle miles traveled (VMT) taxes, and mileage-based user fees (MBUF) all describe the same, increasingly examined solution to this issue: the creation of a per-mile fee charged to road users based on miles driven.
At the center of this discussion lies the trucking industry. As one of the heaviest road users and payers into existing state and federal fuel taxes, trucking companies stand to be most directly affected by a change in the way DOTs procure funding. Unless developed and implemented properly, MBUF could become burdensome to trucking companies. Therefore, policymakers should use data-driven information to build a plan that addresses the interests of the trucking industry, continues to promote environmental stewardship and provides sustainable funding to build and maintain roads.
Current State of the Trucking Industry
The International Fuel Tax Agreement (IFTA) requires trucking companies to track the mileage of each truck, including the number of miles driven in each state, as a basis for calculating the amount of fuel tax paid to each state. Through this agreement, companies must keep a record of the number of miles traveled in each state to accurately pay state-by-state fuel taxes to see that state DOTs receive accurate payment for the use of their roads. IFTA simplifies a previously complex system of registering and paying fuel taxes on a state-by-state basis, which serves as a lesson to federal and state policymakers looking to implement alternative transportation funding solutions.
As of Dec. 16, 2019, trucking companies are also required to use an electronic logging device (ELD), instead of paper driving logs, to comply with hours of service. While this process was developed for safety reasons, some policymakers have asserted that, since companies are already tracking their drivers’ workdays — including location data — it makes sense to use that device to track where each truck is. However, there are several issues with this approach. First, through various exemptions, not all trucks are required to have such devices. Additionally, the system is not designed to log a GPS location precisely enough for the purposes of MBUF. And while many fleet management technologies used by trucking companies for business reasons provide precise location reporting, that level of detail is not required by the ELD rule.
Furthermore, trucks have not yet seen the major fuel efficiency increases found in the passenger vehicle sector. Therefore, diesel tax revenues are not projected to see the sharp decline forecasted for gas tax revenues, mostly attributed to the adoption of electric vehicles.
For all of these reasons, much of the trucking industry views the fuel tax as a functioning revenue source that is effectively tracked and paid into. Despite the continued funding from various trucking sectors, a change in how DOTs are funded, especially by passenger vehicles, may still be necessary to meet ongoing infrastructure needs.
Several studies and pilot programs now underway are designed to test various solutions to creating an alternative to the fuel tax. For example, the Eastern Transportation Coalition is conducting a pilot for 200 trucks, gathering data across various trucking sectors and geographies to examine how operational practices or regulatory requirements will align with or obstruct the potential implementation of MBUF. This pilot builds off the nation’s first multistate truck mileage-based user fee pilot that the Eastern Transportation Coalition completed earlier this year.
State DOTs are also working to develop solutions. The Missouri Department of Transportation (MoDOT) has analyzed the impacts of fuel efficiency-based registration fees. Under a miles-per gallon-based system, owners of more fuel-efficient vehicles would pay a higher registration fee than owners of vehicles with lower fuel efficiency, in an effort to stabilize revenues. In this way, MoDOT would seek to equalize fees across vehicle types, providing a continued, effective revenue source for transportation infrastructure improvements. Owners of fuel-efficient vehicles would pay slightly higher registration fees but less in gas taxes, while owners of less fuel-efficient vehicles would continue to pay much more in gas tax but save on registration fees.
Combining projects such as these allows us to understand how alternative transportation funding impacts all sectors of transportation, offering data to industry organizations and policymakers as they determine the most effective route forward. But there are many questions yet to be answered, specifically as alternative transportation funding relates to trucking:
- Should trucks or passenger vehicles face MBUF first?
Trucks already report their mileage and, in some ways, have the technology and system in place to effectively comply with an MBUF. However, if diesel tax revenues are not significantly declining, what would be accomplished by having trucks as the first vehicles subjected to MBUF? If EVs are subject to MBUF first, whether voluntarily or mandatorily, it could add to the funding for the upkeep of roads to which EV owners do not currently equitably contribute because they do not pay fuel taxes.
- How will different sectors of trucking be affected by MBUF?
MBUF will impact an intermodal trucking company that makes trips in and out of ports differently from a tank truck company or a truckload carrier that may make longer trips. The trick will be to fashion an MBUF model that works across all sectors, including rental trucks, those that operate in a single state and those that travel across the country.
- How do organizations align policies so that MBUF incentivizes other policy goals?
The ideals of continued environmental stewardship and sustainable DOT funding through fuel taxes could be at odds in a world dominated by fuel-efficient vehicles. How do we continue to promote both while minimizing barriers to EV adoption? This is a complicated — in some ways, paradoxical — issue for DOTs, many of which are actively attempting to improve fuel efficiency in their states. In the end, DOTs will have to maintain and build roads upon which fuel-efficient vehicles travel. A change, if done properly, could be a solution to both sustainable funding and environmental stewardship.
Developing the transportation systems of the future goes beyond funding. We help develop long-range plans that support policy changes that provide effective solutions to the public.