This chapter evaluates the equity of the current Federal user fee structure and assesses general user fee options that could improve user fee equity. Both vertical equity (equity across different vehicle classes) and horizontal equity (equity among vehicles within the same class) are evaluated. Implications of changes in the distribution of highway program expenditures on user fee equity for different vehicle classes also are evaluated. User fee payments to all levels of government are compared to total agency cost responsibility to evaluate the extent to which different vehicle classes pay their share of total highway costs at all levels of government. Finally this chapter analyzes the efficiency of the Federal user fee structure by comparing user fees to marginal costs associated with the use of highways by different vehicle classes and discusses implications of social costs of highways estimated in the previous chapter for user fee equity.
Highway user fee payments and the highway cost responsibility of different vehicle classes were evaluated in preceding chapters. In this chapter the equity and efficiency of highway user fees are analyzed by evaluating how well user fees match cost responsibility for various groups of vehicles. As in previous Federal HCASs, a principal focus is on the equity of Federal highway user fees. Equity is measured by comparing user fees paid by vehicles in each class to highway costs attributable to each class. The ratio of revenues to costs is called an "equity ratio." If vehicles in a particular class pay 20 percent of total HURs and are responsible for 18 percent of total highway costs, their "equity ratio" is 1.11 (0.20 divided by 0.18). The closer an equity ratio is to one, the more nearly user fees match cost responsibility. A ratio greater than one means that user fee payments exceed cost responsibility and that a vehicle is overpaying its cost responsibility. A ratio less than one indicates that user fees do not cover the cost responsibility of vehicles in that class and that those vehicles are underpaying their cost responsibility.
Comparing equity ratios across vehicle classes measures the "vertical equity" of the highway user fee structure. Equity ratios among vehicles within the same class can vary considerably, however, and those variations must also be considered in evaluating approaches to improve overall user fee equity. Among the factors that affect horizontal equity are vehicle weight, annual mileage, vehicle price, and other characteristics that affect either user fees paid by different vehicles or their cost responsibility. The most significant of these factors at the Federal level is generally weight, but differences in annual mileage and vehicle price also can affect equity ratios. Annual mileage is a more important factor at the State level where registration and other fees that are invariant with mileage represent a greater portion of total user fees than at the Federal level.
All Federal user fees except the HVUT are related in part to mileage, and thus total Federal user fees vary more directly with mileage than do most State user fees. Since weight is the most important factor affecting horizontal equity at the Federal level, the bulk of the analysis of user fee equity presented in this chapter focuses on differences associated with vehicle weight. Everything else being equal, the greater the weight, the lower the equity ratio for vehicles within the same class. This direct relationship between weight and equity ratios does not hold when comparing equity ratios across vehicle classes since, as shown in Chapter V, the highway cost responsibility of vehicles at the same gross weight but in different classes varies dramatically.
Table VI-1 shows for the ISTEA base period (1993-1995) and the 2000 forecast year shares of Federal user fees paid by several vehicle classes, their shares of Federal cost responsibility, and their equity ratios at different weights. In the ISTEA period, user fees paid by three broad groups of vehicles (passenger vehicles, single unit trucks, and combination trucks) were, on average, within 10 percent of their cost responsibility. User fees paid by combination trucks were within 5 percent of their cost responsibility on average while user fees paid by passenger vehicles and single unit trucks were within 10 percent of their highway cost responsibility.
Equity ratios in the 2000 analysis year are expected to be about the same as in the ISTEA base period for these broad groups of vehicles. The most significant change is a decline in the overall equity ratio for combination trucks from 1.0 to 0.9. The principal reasons that equity ratios for combination vehicles are expected to decline in 2000 are (1) beginning in FY 1996 2.5 cents per gallon of fuel taxes that previously had been dedicated for deficit reduction were deposited in the HTF, and (2) VMT growth rates for trucks are projected to be higher than for personal use vehicles.
Table VI-2 compares equity ratios estimated on the basis of vehicle registered weights with equity ratios based on vehicle operating weights. Equity ratios shown in Table VI-1 and those shown in the remainder of this report are estimated based on registered weights and reflect the costs occasioned and user fees paid over the entire spectrum of weights at which vehicles operate during the course of a year. Distributions of operating weights for vehicles registered at particular operating weights represent averages across all vehicles at a particular registered weight. Some vehicles would be expected to operate a higher percentage of their total annual mileage at lower weights than average and some would operate at higher average weights. The extreme would be if a vehicle operated 100 percent of the time at its registered weight. In that extreme case the registered weight equity ratio would equal the operating weight equity ratio.
As shown in Chapter IV, fuel taxes account for all Federal user fees paid by personal use vehicles, but are only a portion of total truck fees. Any increase in fuel taxes going to the HTF increases the share of total user fees paid by personal use vehicles more than the trucks' share of fees. These differential changes in shares of user fee payments tend to increase equity ratios of personal use vehicles and reduce equity ratios of trucks.
The faster VMT growth rates for trucks compared to personal use vehicles also tend to reduce equity ratios for trucks. For personal use vehicles whose revenues per mile of travel are greater on average than their cost responsibility per mile, increases in VMT result in revenues growing more than cost responsibility and equity ratios thus increasing. The opposite is true for trucks; their costs rise faster than their user fee payments as annual mileage increases, resulting in lower equity ratios. Therefore any general growth in travel tends to increase equity ratios slightly for personal use vehicles and decrease equity ratios for trucks as a group. The higher VMT growth rates for trucks accentuate these general relationships between travel growth and equity ratios.
Within these broad groups of vehicles, there are large variations among different vehicle configurations and weight groups. Among personal use vehicles, pickups and vans have poorer equity ratios than automobiles because they consume more fuel than automobiles while having approximately the same cost responsibility per mile of travel. While not explicitly shown in Table VI-1, there are large variations in equity ratios among different automobiles related to differences in their fuel economies. The equity ratio for autos in Table VI-1 is based on an average fuel economy of approximately 25 miles per gallon, but fuel economies for autos may vary from more than 40 miles per gallon to less than 15 miles per gallon. The equity ratio for the average auto is approximately 1.0, but vehicles getting 40 miles per gallon would pay only about 65 percent of their Federal highway cost responsibility, and vehicles getting 15 miles per gallon would pay about two-thirds more than their Federal highway cost responsibility. Within the pickup and van category, there also are large variations in fuel economy, although not as large as for autos. User fees paid by pickups and vans with better than average fuel economy would be closer to their cost responsibility, while vehicles with poorer than average fuel economy would overpay even more than the average pickup and van shown in Table VI-1.
Since fuel taxes are the only Federal user fee that personal use vehicles pay, there are limited opportunities to improve equity ratios among different personal use vehicles under existing user fees. If a mileage tax were substituted for the fuel tax, differences in equity ratios associated with differences in fuel economy could be eliminated, but the incentive provided by the fuel tax to reduce fuel consumption would be lost.
Within the single unit truck category vehicles range from small 2-axle delivery trucks to large 4- and 5-axle trucks hauling bulk commodities. In the ISTEA base period, single unit trucks registered under 25,000 pounds paid on average about 60 percent more in Federal highway user fees than their share of highway cost responsibility, while single units registered above 50,000 pounds paid only half their cost responsibility. In the 2000 analysis period, equity ratios for all single units drop slightly.
Table VI-3 shows equity ratios for 2-axle, 3-axle, and 4-axle single unit trucks at different registered weights. Overall, 2-axle single unit trucks pay more than their share of highway costs while both 3-axle and 4-axle single units pay less than their cost responsibility. Within each configuration, equity ratios drop as weight increases reflecting the fact that cost responsibility increases faster with weight than do user fee payments. At any given weight, vehicles with more axles have higher equity ratios because of their lower cost responsibilities. More than 70 percent of 2-axle single units have equity ratios equal to or above 1.4, yet the overall equity ratio for the class is 1.2.
Within the 2-axle single units and 4+ axle single units trucks with 3-axles and 4+ axles classes, the majority of vehicles pay less than their share of highway costs. Many of these vehicles are construction vehicles, garbage trucks, tankers, and other vehicles that haul high density cargo and carry the maximum allowable weight much of the time. Even though they also travel empty part of the time, infrastructure costs when those vehicles do travel loaded push their equity ratios below one.
Figure VI-1 shows estimated overpayments or underpayments per vehicle by single unit trucks at different registered weights in 2000. Two-axle single units registered at less than 30,000 poundspay more than their highway cost responsibility, but overpayments are less than $100 per vehicle.
At 30,000 pounds 2-axle single units underpay by less than $10 per vehicle. The relatively few 2-axle trucks registering at 40,000 pounds each pay about $360 less than their highway cost responsibility and underpayment increases sharply for registrations at higher weights.
Three-axle single unit trucks registered at 40,000 pounds or less pay more than their highway cost responsibility; overpayments range from $250 for vehicles registered at 20,000 pounds to about $150 for those registered at 40,000 pounds. Beyond 40,000 pounds 3-axle single units pay less than their cost responsibility. Underpayments per vehicle increase gradually to about $630 for vehicles registered at 60,000 pounds and over $3,200 for vehicles registered at 80,000 pounds.
Even though they have an additional axle, 4-axle single units underpay about the same amount per vehicle as 3-axle single units at weights between 60,000 and 80,000 pounds. Several factors account for this including (1) the operating weight distribution of 4-axle single units has more total travel at higher operating weights, (2) 4-axle single units travel on average more miles per year than 3-axle single unit trucks, and (2) bridge costs allocated to 4-axle single units are shared among fewer vehicles, thereby increasing the average cost per vehicle. There are estimated to be only about 125,000 4-axle single units, compared to about 700,000 3-axle single units and over 5 million 2-axle single units, but almost all of those 4-axle single unit trucks pay significantly less than their share of highway costs.
Table VI-4 shows total over and underpayment for single unit trucks at different registered weights and over and underpayments per vehicle. The over and underpayments per vehicle correspond to datashown in Figure VI-1. Total over and underpayments are simply the per vehicle amounts multiplied by the number of vehicles at each weight. In many cases the weight with the highest per vehicle over or underpayment is not the weight with the greatest total because there are relatively few vehicles registered at that weight.
In the ISTEA base period, the lightest combinations paid about 70 percent more in user fees than their highway cost responsibility, but combinations registered above 100,000 pounds paid only about half their cost responsibility. In 2000 equity ratios for combinations are expected to be marginally lower for most vehicle classes and weight groups, primarily because beginning in FY 1996, 2.5 cents of fuel tax that had been going for deficit reduction was deposited in the HTF. This 2.5 cents per gallon was not considered in estimating equity ratios during the ISTEA period because proceeds were used for deficit reduction rather than being deposited in the HTF. After 1996 the 2.5 cents is included in the cost allocation and equity analysis. A general Federal fuel tax increase always has the effect of raising equity ratios for autos and lowering them for heavy trucks because trucks pay other taxes in addition to fuel taxes. The fuel tax increase has a smaller effect on total user fee payments by heavy trucks than it does on total payments by autos.
Table VI-5 shows equity ratios for six types of combination trucks -- 5- and 6-axle tractor-semitrailers; 5-, 6-, and 8- or more axle twin-trailer combinations; and a 7-axle triple trailer combination. Overall equity ratios for these vehicles range from 0.8 for the 6-axle tractor-semitrailer and the 8- or more axle twin trailer combination to 1.3 for the 6-axle twin trailer combination. Many factors affect the relative equity ratios of these different vehicles including the number and types (single, tandem, or tridem) of axles, the types of roads on which they travel, and their operating weight distributions.
In general, the more axles a vehicle has, the higher its equity ratio at any given weight, but there are exceptions depending on the operating weight distributions of vehicles at various registered weights. Even though the 6-axle tractor-semitrailers has more axles than the 5-axle tractor-semitrailers, its overall equity ratio is lower because a greater percentage of 6-axle tractor-semitrailer travel is at heavier weights. Both 5-axle tractor-semitrailers and 6-axle tractor-semitrailers register predominantly at 80,000 pounds, and at that weight the benefits of the additional axle is evident. The 5-axle tractor-semitrailers pays less than its share of highway costs at 80,000 pounds while the 6-axle tractor-semitrailer pays more than its share of costs. Although most 6-axle tractor-semitrailers pay more than their share of highway costs, the large underpayment by 6-axle tractor-semitrailers over 80,000 pounds registered weight is enough to cause the entire class to pay less than its share of highway costs.
Benefits of extra axles also are evident among the twin-trailer combinations. At registered weights of 80,000 pounds, 5-axle twins have equity ratios of 1.0, 6-axle twins have equity ratios of 1.4, and 8- or more axle twins have equity ratios of 1.9. Eighty thousand pounds is the predominant registered weight for 5- and 6-axle twins, whereas most 8- or more axle twins register or have permits to operate at 110,000 pounds or more. Equity ratios are less than one for 8+ axle twins registered at 120,000 pounds or more, but are greater than or equal to one up to 110,000 pounds, demonstrating the benefits of additional axles. Equity ratios for light triples are about the same as 6-axle twin trailer combinations at the same weights, but equity ratios for heavier triples fall below those of 6-axle twins, even though the triple has more axles. The triple's 7 single axles are more damaging than the 4 single and 1 tandem axle of the 6-axle twin trailer combinations.
Figure VI-2 shows overpayments and underpayments per vehicle for selected combination trucks at different registered weights. The relatively few combination vehicles that register at 50,000 pounds pay almost $2,000 more than their highway cost responsibility. Five-axle tractor semi-trailers continue to overpay until their registered weights reach 75,000 pounds, and at 80,000 pounds, the most common registered weight, each vehicle underpays its cost responsibility by over $550. Even though cost responsibility on an operating weight basis is greater for 5-axle twin trailers than 5-axle tractor-semitrailers at any given weight, the twin trailer combinations generally overpay more per vehicle at low registered weights and underpay less per vehicle at higher registered weights than 5-axle tractor-semitrailers. The primary reason is that the operating weight distributions of the two vehicle classes are different with the tractor-semitrailer having a greater percentage of its travel at higher operating weights than the twin trailer combination. Both the 6-axle tractor-semitrailer and the 6-axle twin trailer combination have lower underpayments per vehicle than their 5-axle counterparts, but the 6-axle tractor-semitrailer registered at 90,000 pounds still underpays its cost responsibility by almost $2,200.
Table VI-6 shows the over and underpayments per vehicle displayed graphically in Figure VI-2 and total over and underpayment by different vehicle classes at different registered weights. As a group, 5-axle tractor-semitrailers registered at 80,000 pounds pay almost $600 million less than their highway cost responsibility, which is by far the greatest underpayment by any vehicle class. The underpayment per vehicle for this group is about $560, but since there are a million vehicles in the group, the total underpayment is quite large. In general, the registered weight groups with the highest over or underpayments per vehicle for each vehicle class are ones with relatively few vehicles.
Table VI-7 shows total over or underpayments by each of the 20 vehicle classes across all registered weights. The largest overpayment is the $1.6 billion overpayment by pickups and vans that is related primarily to their relatively poor fuel economy compared to automobiles. The other vehicle classes with net overpayments are 2-axle single unit trucks, the three truck trailer combinations, and 5- and 6-axle twin trailer combinations. The $600 million underpayment by 5-axle tractor-semitrailers is the largest of any vehicle class, followed by automobiles, 3-axle single units and 4+ axle single units that underpay by $323 million, $307 million, and $276 million respectively.
The equity ratios discussed above are based on an assumption that the distribution of obligations by improvement type in 2000 will be approximately the same as in the ISTEA (1993-1995) base period.
Table VI-8 summarizes the assumed distribution of Federal obligations by improvement type in 2000. One-fifth of obligations are assumed to go for new capacity which includes adding lanes to existing highways as well as constructing new roadways and bridges. Over two-fifths of obligations are assumed to go for system preservation including pavement 3R, bridge reconstruction and rehabilitation, and minor widening. Fifteen percent of Federal funds are assumed to be obligated for system enhancement including safety and traffic system management improvements, environmental projects, and other improvements that neither add lanes of capacity nor repair physical deterioration of existing facilities, but which improve the efficiency of the system and contribute to meeting other public purposes.
Table VI-9 shows the percentage of costs for each improvement category allocated to different vehicle classes. Automobiles, pickups, and vans are responsible for about half of new capacity costs, 40 percent of system preservation costs, almost 90 percent of system enhancement costs, all project costs funded from the MTA, and 70 percent of other highway costs. Combination trucks which account for about 4 percent of total VMT are responsible for 37 percent of capacity costs, 44 percent of system preservation costs, 7 percent of enhancement costs, and 20 percent of other costs. As discussed in Chapter V, no mass transit costs are assigned to combination or single unit trucks because transit costs are uniquely occasioned by autos, pickups and vans operating in urban areas.
Table VI-10 shows cost responsibilities per mile of travel for the different vehicle classes. Cost responsibilities for automobiles, pickups and vans are almost identical, with automobiles having slightly higher cost responsibilities per mile of travel for new capacity, system enhancement, and transit. The highest costs per mile for these personal use vehicles are for system preservation, followed by system enhancement, mass transit, new capacity,and other costs. Among the truck classes, the 4-axle single unit trucks stand out as having the highest costs, 18.5 cents per mile. On average, those trucks travel a large percentage of their annual mileage fully loaded with dense commodities. While they have tridem axles, they nevertheless are responsible for significant pavement and bridge costs. The only other vehicles with total cost responsibility over 10 cents per mile are 7- and 8- or more axle twin trailer combinations that operate at much higher gross weights than the 4-axle single units. Like the single units, the highest per mile costs for these vehicles are for system preservation, followed by new capacity and enhancements.
If Federal funds were obligated differently, cost responsibilities and equity ratios of different vehicle classes could be affected. Table VI-11 shows distributions of Federal obligations by improvement type for the 2000 base case and for four alternative investment scenarios. Scenario 1 assumes obligations for system preservation based upon estimated investment requirements in the 1995 C&P Report to maintain system conditions. The same overall investment level is assumed as for the base case. In this scenario, increases in obligations for system preservation are offset by reductions in obligations for new capacity and enhancements. The distribution of obligations by highway type is the same as in the base case. In all scenarios, obligations from the MTA are assumed to be equal to revenues to the account, and obligations for FHWA administration, Federal lands improvements, and other related obligations are assumed to be atthe same level as in the base case.
Scenario 2 is similar to Scenario 1 except that obligations are focused on the Interstate System, the NHS, and other principal arterial highways. Obligations on lower order systems are reduced by 50 percent. Scenario 3 assumes greater obligations for new capacity, with related decreases in obligations for system preservation and enhancement. The distribution of obligations by highway functional class is the same as in the base case. Scenario 4 is based upon the Administration's National Economic Crossroads Transportation Efficiency Act Proposal and specifically includes $600 million per year for AMTRAK allocated to personal use vehicles.
Table VI-12 shows estimated 2000 equity ratios under these alternative investment scenarios. The two reports in which obligations for system preservation increase both result in equity ratios for combination trucks falling from 0.9 to 0.8. In Scenario 1 where the distribution of obligations by highway class remains the same as in the 2000 base case, equity ratios for single unit trucks also drop to 0.8, but in Scenario 2 where increases in obligations for system preservation are assumed to be concentrated on higher order systems, the equity ratios for single unit trucks remain at 0.9. The reason is that combination truck travel is concentrated on higher order systems whereas more single unit travel is on lower order systems where less Federal money is expended. Clearly equity ratios of different vehicle classes are affected by how and where Federal funds are spent.
In Scenario 3 which assumes increases in obligations for new capacity, equity ratios are the same as for the base case. The cost responsibility for capacity improvements is more evenly shared among all vehicle classes than for other types of improvements. Equity ratios under Scenario 4 which also remains the same as for the base case.
This analysis of implications of alternative Federal investment patterns on user fee equity should not be construed to suggest that impacts on equity should be major considerations in investment decisions. Federal monies should be directed to the programs that have the highest net benefits and that meet other transportation policy objectives. If changes in program composition contribute to improving user fee equity as has been the case with increased spending on system enhancements under ISTEA, so much the better. But if user equity were to become worse under an otherwise desirable distribution of highway funds, that should not be a significant factor against the investment program. Rather, if user fee equity were to become much worse under some future investment program, it might suggest that user fees should be reexamined with the intent of improving equity given the new investment program.
In the 1982 Federal HCAS, the Department evaluated several user fee options and recommended changes to improve the equity of the user fee structure. The STAA had directed that user fee options be evaluated along with impacts of any proposed changes on affected industries and users. There is no similar requirement that the current 1997 Federal HCAS evaluate user fee options, and the study has not done a detailed examination of alternative user fee structures and potential impacts of potential changes. The study did, however, evaluate several general user fee options to determine the types of changes that could have the greatest impacts on user fee equity both across vehicle classes and among vehicles in the same class. Six general options are discussed in this section and described in Table VI-13. The first two are increases in the diesel fuel tax by 1 cent a gallon and by 6 cents per gallon. These options are aimed primarily at improving vertical equity by reducing differences in equity ratios across vehicle classes. Even though there would be no change in gasoline taxes, equity ratios for automobiles, pickups and vans would fall somewhat relative to ratios for heavy trucks that predominantly consume diesel fuel. In addition to improving equity ratios of combination trucks, these options also improve ratios for heavy single unit trucks that pay little or no HVUT and lower tire taxes than heavy combinations. Increasing the diesel tax has a small effect on horizontal equity as well as vertical equity since heavier vehicles get worse fuel economy than lighter vehicles in the same class. The third and fourth options involve changes to the HVUT. The third option leaves the basic rate structure unchanged but eliminates the $550 cap on the HVUT which results in all vehicles registered above 75,000 pounds paying the same annual HVUT. The fourth option eliminates the $550 cap, extends the tax below the current minimum weight of vehicles subject to the tax below the current 55,000 pound floor, and also evaluates a more progressive-two tier rate structure that better reflects the relative cost responsibilities of single unit and combination vehicles at different weights.
The fifth and sixth options involve WDTs. The fifth option is a simple WDT with different rate structures for single unit and combination vehicles and the sixth option is an axle-WDT that varies according to the number of axles on the vehicle. This option also has a different rate structure for single unit and combination vehicles.
Figures VI-3 through VI-6 show relationships between current user fee payments and highway cost responsibility at different weights for 3-axle single unit trucks and 5-axle combination trucks on both a registered weight basis and an operating weight basis. For both vehicle classes the user fees paid per mile of travel exceed highway costs per mile at light weights, but at heavier weights costs per mile exceed user fees per mile on either an operating or registered weight basis. These graphs illustrate the extent of horizontal inequities related to weight for these two vehicle classes.
Figures VI-7 through VI-8 show revenue and cost curves for 3-axle single units and 5-axle tractor semitrailers under user fee Scenarios 1 and 2, a 1 cent per gallon and a 6 cent per gallon increase in the diesel differential. The curves are based on registered weights and thus reflect costs and revenues over the entire spectrum of operations for vehicle at each registered weight. The flat 1 cent and 6 cent per gallon increases in the diesel differential shift the revenue curve for both vehicle classes upward and change the point at which revenues equal costs, but they have little or no effect on horizontal equity.
Table VI-14 shows how changes in the diesel differential would affect equity ratios for broad vehicle classes in 2000. Equity ratios with a 1 cent per gallon increase in the diesel differential show little change from ratios under the current user fee structure. A 6 cent per gallon increase in the diesel differential, however, would move equity ratios for both single unit and combination trucks closer to one. Light trucks that overpay under the current user fee structure would overpay even more with increases in the diesel tax, but heavier trucks that underpay under the current fee structure would underpay less. Thus increasing the diesel differential could improve the vertical equity of the user fee structure by reducing the underpayment of the single unit and combination truck classes, especially if the differential were increased by more than a penny.
Figures VI-9 and VI-10 show revenue and cost curves for Scenarios 3 and 4, which would modify the HVUT. Scenario 3 eliminates the $550 cap on the HVUT and Scenario 4 changes the underlying fee structure to make it more progressive with weight and to establish separate fee structures for single unit and combination vehicles to reflect differences in their cost responsibilities at any given weight.
The revenue curve for Scenario 3 is identical to the curve for existing fees up to 75,000 pounds, and then is slightly higher reflecting the lifting of the HVUT cap. Comparing revenue curves for Scenario 4 with the cost curves in Figures VI-9 and VI-10 indicates that with more progressive HVUT rates, the Federal user fee structure could much more closely reflect differences in cost responsibility due to weight for both single unit and combination vehicles.
Table VI-15 compares equity ratios for the two HVUT scenarios with ratios for the current user fee structure. Simply eliminating the cap would affect only those vehicles registered over 75,000 pounds, but this includes the majority of over-the-road combination vehicles that register at 80,000 pounds. The additional HVUT that those vehicles would pay would only be $110 a year which is not enough to raise their equity ratio above 0.9, the level under the existing user fee structure. Equity ratios under Scenario 4 improve considerably more for the heavier trucks because the underlying rate structure has been substantially modified to more closely match differences in cost responsibility of single unit and combination trucks at different weights. Equity ratios for lighter single units and combinations get marginally worse because other user fees are assumed to remain, but it would be possible to improve equity for those vehicles as well if more comprehensive changes to the entire user fee structure were evaluated.
Table VI-16 shows the HVUT rate structure from which equity ratios in Table VI-15 were developed. Unlike the existing HVUT rate structure, the rate per 1,000 pounds increases with increasing GVW, reflecting the shape of the cost responsibility curve. Also separate rate structures are developed for single unit trucks and combinations since the cost responsibility at specific weights varies considerably among those classes of vehicles. This allows both vertical and horizontal equity to be improved considerably over the existing HVUT or the Scenario 3. It must be emphasized that the rate structure in Table VI-16 is purely illustrative and does not represent a recommended or optimal rate structure. Many other factors would have to be considered in developing a recommended revision to the current HVUT rate structure. Nevertheless, this rate structure does indicate the order of magnitude of rates that would be necessary to match cost responsibility for the estimated 2000 program costs assuming that all other Federal user fees remained in place. Other options where an improved HVUT was substituted for some or all of the existing truck taxes were not examined in this study.
The HVUT rate structure in Scenario 4 is more complex than the existing rate structure which could present some administrative or enforcement difficulties, especially for truck trailer combinations, but implementation issues were not assessed in this study. Changes in the HVUT can be effective in capturing differences in cost responsibility among vehicles with different weights, but they do not reflect differences in costs associated with annual use.
Table VI-17 shows differences in HVUT payments per mile for vehicles with different annual mileages. Since other Federal user fees vary with annual mileage, the HVUT represents a declining share of total Federal user fees as the annual mileage of a vehicle increases. The typical 5-axle tractor semitrailer pays approximately 6.4 cents per mile in other user fees. For vehicles traveling only 20,000 miles per year the HVUT represents 30 percent of total annual Federal user fee payments whereas for vehicles that travel 120,000 miles annually the HVUT represents only 7 percent of total annual fees. When the HVUT is low as under existing tax rates the overall inequity for vehicles with different annual mileages is fairly small, but if the HVUT were larger it could cause significant inequities among vehicles that travel different annual mileages.
Figures VI-11 and VI-12 show revenue and cost curves for Scenarios 5 and 6, a simple WDT and an axle-WDT. Both taxes can match the cost responsibility curve of the 5-axle tractor-semitrailer fairly well because it is such a predominant vehicle among combinations across a wide range of weight groups.
This is not the case for single unit trucks where there is more overlap among 2-, 3-, and 4-axle vehicles. The axle WDT can capture differences in the cost responsibility of those three vehicle classes, but the simple WDT must reflect an average cost responsibility of the various single unit trucks and thus cannot match as precisely the cost responsibility of specific vehicle classes.
Tables VI-18 and VI-19 summarize the rate structures for the WDT and axle WDT option. Rates for single unit trucks under the simple WDT range from 0.50 cents per mile to 26 cents per mile for the heaviest weights. Under the axle WDT, single unit truck rates range from 1 cent per mile for the lightest 4-axle single unit to 25 cents per mile for the heaviest 4-axle single unit. At any given weight the more axles on the vehicle, the lower the WDT rates. The WDT rates for combinations range from less than 1 cent per mile to 18.0 cents per mile for the heaviest combinations. Axle WDT rates vary even more widely depending on vehicle weight and number of axles. Again it must be remembered that these are simply illustrative tax rates schedules that match fairly closely the estimated Federal cost responsibility of different vehicle classes.
Table VI-20 summarizes equity ratios for broad vehicle classes for the two WDT scenarios as well the other four user fee scenarios discussed above.
Table VI-21 summarizes the findings of the all levels of government cost allocation analysis. At each of the three levels of government, equity ratios for 2000 are shown for each of the major vehicle classes. The equity ratios at each level of government are defined as the ratio of the share of user fee payments for each vehicle class at a specific level of government to the share of highway costs that vehicle class occasions for programs funded at that level of government.
A few important clarifications are necessary in order to interpret the findings summarized in Table VI-21:
The results at the Federal level differ slightly from those shown in more detail later in this chapter because they include only Federal programs funded from the HTF; whereas Table VI-21 includes all Federal obligations, i.e., all direct Federal construction and maintenance on Federal lands and Federal-aid to State and local governments, including Federal programs funded from sources other than the HTF.
User revenues do not equal obligations or expenditures at any level of government, unlike the previous analysis based on the HTF, because all user revenues are included in this table, except Federal deficit reduction revenues, regardless of their use; and all highway expenditures (or obligations at the Federal level) are included regardless of their funding source. (Equity ratios are nonetheless equal to 1.00 at each level of government for all vehicles as a whole because equity ratios are defined as shares of user fee payments divided by shares of cost responsibility.)
At the State and local levels, the projected revenues are based on extrapolation of trends, as described in detail in Chapter IV, rather than on current tax rates, as assumed for the Federal level analysis. The State and local revenue projections imply trend increases in tax rates, and incorporate some shifts in the proportion of revenues from different sources.
Because State revenues and programs are larger than those of either of the other two levels of government, the State equity ratios have the greatest effect on the overall national equity ratios.
Because local HURs are only a small fraction of local expenditures, the local level equity ratios are a much less important component of overall equity ratios.
Table VI-21 shows that the ratio of highway user fees to highway-related expenditures/obligations is estimated to be 0.8 for all levels of government in 2000. Preceding analyses have assumed that 2000 obligations from the HTF will equal 2000 HTF receipts. Because the overall ratio of user fees to expenditures is different in this table than in others, the interpretation of ratios of user fees to cost responsibility for different vehicle classes is somewhat different, and ratios for all levels of government in Table VI-21 cannot be directly compared to ratios in other tables where overall user fees and highway-related expenditures are equal. As noted above, Federal obligations in this table are not limited to funds from the HTF, but also include highway-related obligations financed from the General Fund, principally highway construction by other Federal agencies. Because obligations exceed highway user revenues in this table, revenue-cost ratios at the Federal level are lower for all vehicle classes than in other tables in this report that only include highway programs funded from the HTF.
For Federal and State programs combined, passenger vehicles, single unit trucks, and combinations all pay approximately their share of highway-related costs in the aggregate. Single unit trucks as a group pay slightly more than their cost responsibility while combinations pay slightly less than their highway costs overall. As for previous analyses of Federal equity ratios, there are significant differences in revenue-cost ratios for vehicles at different weights.
Differences in Federal and State user fee structures lead to differences in revenue-cost ratios for specific vehicle classes at the two levels of government. For instance, single unit trucks as a group pay less than their share of highway costs at the Federal level, but more than their share of costs at the State level. Differences are particularly large for the lightest single unit trucks that pay 2.2 times their cost responsibility on average at the State level, but pay Federal user fees that are much closer to their cost responsibility. At both the Federal and State levels the heaviest single unit trucks pay only half their highway cost responsibility when all highway program costs are considered. Whereas at the Federal level the heaviest combinations, those over 80,000 pounds, pay only about 60 percent of total cost responsibility, at the State level those vehicles pay approximately their proportionate share of highway costs. The relatively good equity ratios at the State for combination trucks registered at over 80,000 pounds can be attributed to the fact that a few States have more carefully tailored their tax structure to reflect cost responsibility and allow combinations to operate over 80,000 pounds while charging user fees related to their cost responsibility. A few States regularly adjust their tax structures to reflect cost responsibility, and these States tend to focus equity comparisons on heavy vehicles and equity between trucks and competing modes of transportation.
The preceding discussion of potential changes to improve Federal user fee equity focused on options to more closely match user fees paid into the HTF by different vehicle classes to costs paid from the HTF that are attributable to those vehicle classes. The equity of the highway user fee structure has been a long-standing issue in HCASs at both the Federal and State levels, but recently there has been increasing interest in the economic efficiency of highway user fees. The earliest discussions of efficient highway pricing revolved around the potential for using congestion pricing to promote more efficient use of limited highway capacity. The discussion has been broadened to include air pollution, noise, and other external costs that highway users impose on others through their use of the highway.
To maximize net benefits to society of highway use, benefits of each trip should exceed the costs of the trip. The relevant costs that should be considered are variable costs that would not be incurred if the trip were not made. These costs include public costs of pavement deterioration and private costs imposed on others by the trip including delay, air and noise pollution, and safety costs. Most other public costs such as bridge, safety, and other infrastructure costs do not vary directly with the extent of highway usage and are not included with marginal costs. Since motorists typically do not consider pavement, environmental, and other external marginal costs in deciding whether or not to make their trip, there may be some trips made whose benefits do not exceed the costs, resulting in an inefficient utilization of resources.
The 1982 Federal HCAS examined the efficiency of Federal user fees by comparing user fees to marginal costs of highway use, including pavement, air pollution, noise, and congestion costs. Since there is no direct way to allocate marginal costs among different levels of government, the 1982 Federal HCAS estimated the share of total marginal costs that should be recovered at the Federal level as the share of total HURs that comes from Federal user fees. The reasoning was that this would maintain the same relative responsibility for financing highways among the different levels of government. This same approach is used in this study.
Overall marginal costs of highway use were estimated in Chapter V. The share of total HURs coming from Federal user fees is approximately 28 percent, so it is assumed that 28 percent of total marginal costs should be recovered at the Federal level to retain the same relative burden of financing highways by different levels of government. Coincidentally, this is the same percentage as was used in the 1982 HCAS.
Table VI-22 compares the Federal share of marginal highway costs with agency cost responsibilities of different vehicle classes in different operating environments and with estimated Federal user fee payments. As pointed out in Chapter V, congestion, air and noise pollution, and pavement deterioration vary geographically, so the marginal cost of a trip is different in rural areas than in urban areas. Furthermore, each of these costs varies according to the type of vehicle making the trip, so marginal costs must be estimated for different classes of vehicles. Agency costs also vary significantly depending on the type of vehicle and the highway system upon which that vehicle operates.
Table VI-22 shows that with the exception of automobiles, agency costs are higher than the estimated Federal share of marginal costs for rural travel by each of the vehicle classes. This reflects the fact that marginal costs of congestion, noise, and safety are relatively low in rural areas; overall agency cost responsibility in rural areas exceeds the sum of the marginal pavement costs plus these other marginal costs. In urban areas the opposite is true. Not only are the costs of congestion and noise higher in urban than rural areas, but marginal pavement costs also are higher, reflecting among other things the higher construction costs in urban areas. An addendum to this report will include marginal costs of air pollution.
For most vehicle classes, Federal user fees exceed marginal and agency costs in rural areas, but are less than those costs in urban areas. Thus vehicle operations in rural areas whose costs are less than therevenues they produce may be said to subsidize operations in urban areas. This is true whether the costs being considered are marginal costs or agency costs.
While Table VI-22 shows significant differences in marginal costs in rural and urban areas, it does not show the full range over which marginal costs vary in different areas. Table V-27 showed that marginal congestion costs for automobiles on 4-lane urban Interstates could vary from 0.1 cents per mile on low volume highways during off peak periods to over 20 cents per mile on high volume Interstates during peak periods. On the same high volume urban Interstate that had peak period congestion costs of 20 cents per mile, congestion costs during off-peak periods might be only about 3 cents per mile. Likewise, air and noise pollution on urban Interstate highways could vary widely depending on ambient conditions and other site-specific characteristics.
Evaluating whether specific user fee options improve overall economic efficiency is a complex process. The TRB Peer Review Committee outlined steps that would have to be taken to evaluate potential changes in economic efficiency associated with alternative highway user fees. Those steps, as discussed in the Peer Review Committee's second letter report, are as follows:
Specify one or more practical options for user fee systems.
Identify those highway user decisions that are sensitive to the economic incentives embodied in the tax options and that have important cost implications.
Estimate how highway user decisions would be affected by adoption of each user fee option in place of the existing system. A prediction of how highway users would respond to a fee change is the critical step of the efficiency analysis. (A complete analysis would also consider whether changing the fee system would create incentives that could influence highway agency investment and maintenance decisions.)
Estimate how the changes in behavior affect highway agency costs, user fee revenues, and external costs.
Compute the efficiency effect of the tax as the sum of the changes in benefits of freight services to shippers, consumers' surplus from personal travel, user fee revenue, highway agency costs, and costs to non-users. These quantities can be estimated from the results of the preceding steps.
The possibility of external benefits must also be considered in marginal cost pricing. To the extent that there are other beneficiaries of highway use whose interests are not considered by trip makers, analyses of negative externalities will overstate efficient highway user charges and may discourage highway use that results in a net benefit to society. There is disagreement on the relative importance of external benefits of highway use. However, the preponderance of expert opinion lies on the side of saying that nearly all of the benefits of highway use are internal in nature.
"Social benefits of highway use could be considered to be without a significant external element. The amount of such benefits is very large; private expenditures associated with highway transportation accounted for 12.7% of GDP in 1991. ...However, these benefits could be considered to be fully absorbed by those making the decision to drive. For example, in the case of business-related travel, although greater mobility would increase the geographic scope of transactions, the total benefit associated with such transactions would accrue to the parties directly involved and would be reflected in the prices at which they trade. The increased scope of potential interactions would lead to a higher level of economic activity as more beneficial trades were made possible; however, these benefits would be the sum of benefits to all the individuals involved and would not appear to have a substantial element. The benefits of personal travel would be experienced directly by those making the choice, as well as their friends and family, and therefore could be considered to be largely internal."
Predicting how various users would respond to incremental changes in Federal fuel taxes would be relatively straight forward, but predicting responses to large changes would involve more uncertainty. Responses by various users to changes in other existing Federal user fees would depend on the nature of those changes. Small changes in the tire or vehicle excise taxes likely would not have significant effects on highway use, but large changes in those taxes could potentially affect equipment purchase decisions. Two illustrative options involving the HVUT were examined in earlier sections of this chapter. The first which would simply eliminate the cap on the existing tax while maintaining the same overall rate structure would affect only those vehicles registering over 75,000 pounds. The many combination vehicles registering at 80,000 pounds would be affected, but the annual increase in fees would be only about $100. Vehicles registering at heavier weights would pay a larger additional amount that could affect decisions by carriers on how they use their equipment. Rather than registering all of their vehicles at the heaviest allowable weight, some carriers might choose to segregate their fleet into vehicles that operate at heavier weights and those that operate at lighter weights. Depending on the type of operation this could affect the efficiency with which carriers use their equipment, but in no case would the decrease in efficiency be expected to be greater than the difference in tax rates for operations at heavier and lighter weights. The other HVUT option examined in this chapter changed the overall rate structure and applied different rates to single unit and combination trucks to more closely match the highway cost responsibility of different vehicle classes. This option resulted in higher HVUT rates that potentially could affect operational decisions by different carriers. High HVUT rates would provide an incentive for carriers to register and operate vehicles at lower weights if rates were high enough to offset the additional productivity achieved by heavier vehicles. This could tend to increase overall truck travel unless diversion to alternative modes were large enough to offset shifts to lighter vehicles. The magnitude of responses by different carriers would depend to a large extent on the actual HVUT rate structure.
A WDT would provide similar incentives to the HVUT in terms of changes in truck operations. The main difference is that it could reflect differences in the annual mileage traveled by different types of carriers. Low-mileage trucks likely would have a smaller increase in annual fees under a WDT than under the HVUT and thus effects on their operations might be smaller. Conversely, high-mileage carriers could have larger increases in their annual fees, creating a larger potential incentive for them to change their operations. An axle-WDT would provide incentives for carriers to switch to vehicles with more axles and thus could reduce marginal infrastructure costs without having as great an effect on productivity.
This discussion of potential impacts of user fee options on travel behavior and efficiency is necessarily very general; no specific user fee options were analyzed in this study and detailed analysis of industry impacts or institutional issues in implementing various types of user fee options was beyond the scope of this study.
In discussing issues surrounding efficiency changes associated with user fee options, the TRB Committee noted,
... a new tax that was intended to generate revenues equal to marginal costs on average but was not targeted to specific users and circumstances that actually generate costs (e.g., increasing the legal. gasoline tax rate by an amount intended to produce revenues equal to external costs of motor vehicle travel) might not contribute to efficiency. Such a tax could not necessarily be regarded as a solution to the problem of external costs. Another potential problem with attempting to evaluate highway user fees by comparing them to ideal, efficiency-based charges is that it may be a poor policy choice to impose a fee on one source of an external cost while ignoring other sources. For example, charging only transportation sources for air pollution probably would yield substantially lower net benefit than a policy that produced the same quantity of pollution reduction through charges to all sources.
Because of the geographical and temporal variability of congestion, and some other marginal costs, there is limited ability to target Federal user fees toward users contributing the most to marginal highway costs. Existing user fee structures generally are insensitive to the factors that lead to variations in marginal cost and developing new user fees at the Federal level that could capture variations in congestion and environmental costs would be difficult. Potential improvements to economic efficiency from changes in Federal user fees thus are more limited than improvements that could be realized through State and local fees that can be more closely targeted toward users that create the greatest marginal costs. Furthermore, unless other levels of government also implemented efficient pricing, only partial improvements in economic efficiency could be made using Federal pricing mechanisms.
In addition to the interest in estimating marginal costs of highway use for pricing purposes, there is considerable interest in estimating total costs and benefits of highway transportation for other purposes including (1) estimating the relative magnitude of various costs associated with highway transportation; (2) estimating how costs are changing over time, particularly in response to programs aimed at reducing those costs; and (3) evaluating overall costs and benefits of alternative public policies including investment and regulatory policies. A number of recent studies in the United States and Europe have attempted to calculate the full public and private costs of transportation. In addition to air pollution, noise, congestion, crash, and global warming costs, other costs included in various studies have been parking; energy security; solid waste; and water pollution, but these other costs are more difficult to quantify. While there is significant controversy concerning the association between highway use and these various costs and how information on these costs should be used, there is a general recognition that this information is useful for both project and program analysis. There also is a recognition among most analysts that benefits must be considered along with costs in making investment, regulatory, and pricing decisions. In July 1995, the Bureau of Transportation Statistics (BTS) sponsored a conference on measuring the full social costs and benefits of transportation. Proceedings of that conference are summarized in the BTS' 1996 Transportation Statistics Annual Report and papers presented at that conference currently are being compiled for publication. Social costs are discussed in more detail in Appendix E of this report.
Table VI-23 shows the estimated responsibility of different vehicle classes for major social costs of highways in 2000 and also indicates those costs that are borne in the first instance by highway users and those that are borne by others. Excluding air pollution costs, almost 90 percent of the total estimated social costs of $406 billion in 2000 are borne in the first instance by highway users, including almost $300 billion in crash costs and over $60 billion of congestion costs. Air pollution, noise, global warming, and some crash costs are not borne by highway users but by others in society. Crash costs included in this analysis are more comprehensive than those considered by the NHTSA in its Report, The Economic Costs of Motor Vehicle Crashes, 1994, in that they include costs of pain and suffering and other social costs that do not meet the strict "economic cost" criteria used by NHTSA for its report. The costs included, however, are consistent with general DOT policy regarding estimating costs of crashes.
Figure VI-13 summarizes the cost responsibility of different vehicle classes for noise, congestion, and crash costs. Passenger vehicles are responsible for about 93 percent of total costs in these three areas, but cost responsibilities vary significantly across the various impact areas. Combination trucks are responsible for approximately the same percentage of noise-related costs as automobiles.
As noted above, there are considerable uncertainties surrounding valuation of these various social costs. The magnitude of even the low range of these social costs, however, suggests the importance for decision makers at every level of government and the private sector to find ways to reduce those costs. A tremendous amount has already been done on many fronts. Initiatives to reduce air pollution associated with highway travel are good examples. Automobiles are much less polluting now than they were 10 years ago. Manufacturers are making automobiles cleaner, inspection and maintenance programs in our most polluted metropolitan areas are keeping the cars cleaner, and highway fuels are cleaner as well. Significant efforts are underway in many metropolitan areas to provide alternatives to the single occupant automobile and to implement other programs to reduce highway-related emissions in recognition that they cannot rely solely on further improvements in vehicle technology to solve future air pollution problems. Highway users pay for these air quality improvement programs either through higher prices for cars and fuel or through their Federal, State, and local highway user fees.
Likewise, crash rates have been significantly reduced in recent years through a variety of programs focused on improving the safety of vehicles, drivers, and the roadways upon which they operate. Vehicle technology and aggressive improvements to reduce alcohol-related crashes have contributed to the reduced crash rates, but improvements to the highway have also had major impacts on crash and fatality rates. Crash rates on rural Interstate highways are less than half the rates on other principal arterial highways which in turn are safer than collector and local highways. Highway users have paid for technological advances in safety built into the automobile and have also paid for improvements in highway design that have made our highways safer over the years. The magnitude of the remaining crash costs, however, suggests that much more remains to be done to reduce highway crash costs.
Congestion is a tremendous burden on the Nation's productivity and everyone has a stake in reducing congestion, not the least of whom are highway users who bear congestion costs in the first instance. Like other social costs, congestion is being addressed on many fronts by all levels of government and the private sector. Congestion, air pollution, and safety are interrelated, and highway improvements to address one category of costs may also reduce other costs as well. The ITS hold great potential for reducing congestion, air pollution, and crash costs. The Department, in partnerships with State and local governments and the private sector, is aggressively pursuing deployment of near-term ITS technologies and services while continuing research, development, and testing of longer term strategies that hold even greater potential for improving the efficiency of the highway transportation system.
Significant efforts thus are already underway to mitigate air pollution, crash, noise, congestion, and other costs associated with highway transportation. Despite the extensive efforts mentioned above to reduce social costs through new technology, TSM, improved highway design, and other initiatives, a recurring question is whether Federal or State highway user fees should be increased as a form of pricing to help reduce highway travel and thereby reduce environmental, congestion, and other social costs. Fuel tax increases to reduce environmental costs have been proposed in the past, and several European countries justify high fuel taxes in part on the basis that they offset social costs of highway transportation. However, as noted above, an important question that has an ambiguous answer is whether such user fee increases would improve overall economic efficiency. Given the relative inelasticity of demand for travel with respect to the price of fuel, and the lack of alternative modes in many parts of the country, large increases in fuel taxes would be needed to realize significant changes in travel behavior. If imposed uniformly at the national level, such increases would fall equally on all travel, whether or not that travel was causing social costs. Furthermore, such general user fee increases could have substantial adverse impacts on productivity that could outweigh reductions in social costs that are actually achieved.
Clearly the more directly focused that user charges are on both the costs they are intended to reduce and on the highway users occasioning those costs, the more likely that fee increases could improve economic efficiency. Thus a WDT aimed at more closely matching the pavement damage caused by vehicles operating at different weights would be expected to improve efficiency more than an increase in fuel taxes or any other user fees that do not vary by both weight and distance traveled. Likewise, a locally imposed congestion toll that varies by time of day and traffic volume would be a more efficient way to reduce congestion costs than a general Federal or State fuel tax increases that is invariant with respect to time, traffic, or environmental conditions. Questions of the overall impacts of user fees on economic efficiency are beyond the scope of this study, and much more work would be needed to evaluate the many complex interactions at play that would affect answers to such questions. This study can evaluate, however, the types of user fee changes that could improve the overall equity of the highway user fee structure considering both agency and social costs.
Figure VI-14 shows that passenger vehicles have a relatively greater responsibility for social costs than for highway agency costs. Shares of cost responsibility for autos, pickups, and vans are higher for State and local highway programs than for the Federal highway program. Conversely, shares of cost responsibility of single unit and combination trucks are higher for the Federal program than for State and local programs.
Figure VI-15 compares shares of agency costs plus non-user social costs for each broad class of vehicles with that class' share of user fee payments at both the Federal level and for all levels of government. Total costs in Figure VI-15 include only social costs imposed on non-users, whereas Figure VI-14 also includes congestion and safety-related costs that users impose on other users of the highway system. Shares of agency and non-user social costs (excluding air pollution and global warming) attributable to auto, pickups and vans exceed the share of HURs those vehicle classes pay at both the Federal level and at all levels of government. Shares of agency and non-user social costs attributable to single unit and combination trucks on the other hand are less than the shares of HURs those vehicle classes pay at the Federal level and at all levels of government.
In the aggregate changes in Federal highway user fees enacted after the 1982 Federal HCAS and especially changes in the composition of the Federal highway program have made the overall Federal highway user fee structure somewhat more equitable than was found in the 1982 Federal HCAS. Costs for mass transit improvements and many transportation system enhancements that represent an increasing share of overall Federal obligations are largely the responsibility of passenger vehicles, and have shifted some of the overall Federal cost responsibility from heavy trucks to passenger vehicles. System preservation costs, for which heavy vehicles bear a large share of responsibility, still represent a large portion of total Federal obligations, however. The current Federal user fee structure cannot match increases in the cost responsibility of different vehicle classes with increasing weight. While in the aggregate many single unit and combination truck classes are paying approximately their share of highway costs, light trucks in most classes pay more than their share of total Federal highway costs while many heavy trucks pay much less than their share of cost responsibility.
The cost allocation analysis across all levels of government showed that in the aggregate highway agency costs exceed HURs. State and local highway agencies supplement highway agency budgets with revenues from sources other than HURs, although some States dedicate portions of their HURs for non-transportation purposes. When shares of total HURs paid by broad vehicle classes are compared with total cost responsibility for construction, maintenance, operations, and other highway agency costs at all levels of government, equity ratios for those broad classes of vehicles are close to one.
In the aggregate, State user fee structures come closer to reflecting the cost responsibility of combination trucks operating over 80,000 pounds than does the Federal user fee structure. Not all States allow widespread operations of such heavy vehicles, but some that do have developed user fee structures that are able to closely reflect the cost responsibility of those very heavy vehicles. The HVUT which is the Federal tax that most closely reflects relationships between vehicle weight and cost responsibility currently has a cap of $550 that applies to all vehicles registered at 75,000 pounds or more
Analyses of improvements in equity that could be achieved by eliminating the HVUT cap, modifying the overall HVUT rate structure, raising the diesel fuel tax rate, or imposing two different types of WDTs showed varying abilities to improve equity across vehicle classes (vertical equity) and equity among vehicles within the same class (horizontal equity). In general, changes to existing user fees have a larger effect on vertical equity than horizontal equity, and in some cases changes that improve one dimension of equity reduce another dimension. In particular, modifying the HVUT rate structure to make it correspond more closely to relationships between vehicle weight and highway cost responsibility would reduce the equity of the tax for vehicles that have different annual VMT. The two WDT options can produce greater improvements in equity than any of the modifications to existing user fees that were evaluated because they reflect both vehicle weight and annual mileage. Questions about administrative costs, evasion potential, and other implementation issues were not addressed specifically in this study, although a 1988 study of the feasibility of a national WDT evaluated such issues in detail.
In addition to costs borne by highway agencies, there are costs associated with highway travel that are borne by others. These external costs are substantially higher than highway agency costs. Agencies at all level of government have already taken large strides in reducing costs associated with highway crashes, air and noise pollution, and other external costs. Nevertheless, significant costs remain. One potential way to further reduce (but not eliminate) those costs is to charge users who are responsible for the costs. This idea has been examined in the most detail with respect to congestion costs, but it is applicable to air pollution, noise, and other costs as well. A key objective in charging users for these external costs is to improve overall economic efficiency -- to assure that benefits of each trip exceed the costs of the trip. Variations in many external costs by geographic location, time-of-day, and other factors make it difficult to impose a charge at the Federal level that would correspond with costs at particular locations. There is some interest in examining the feasibility of congestion pricing at the state and local level to manage demand on key highway facilities. Local pricing solutions hold the greatest potential fo improving economic efficiency. Agencies at all levels of government, however, should examine the variety of opportunities to reduce social costs associated with highway transportation, while recognizing the benefits of highway transportation to the Nation's economy and to the quality of life of its citizens.
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