Key Takeaways

Contents

Key Takeaways 1

Introduction. 2

What Is an MBUF System? 2

Why Trucks? 4

How Would a Truck MBUF System Work? 5

Trucking Industry Opposition. 6

Claim 1: Trucking Already Pays a Lot 6

Claim 2: Increased Prices for Consumers 6

Conclusion. 7

Endnotes 8

Introduction

With the albeit gradual shift to electric vehicles (EVs), it is only a matter of time before the nation will have to adopt a new way to pay for roads based on a vehicle miles traveled (VMT) system. The technology for such a system is already here and can be implemented to completely protect privacy.[1]

However, while Congress has supported various Mileage-Based User Fee (MBUF) pilot programs, progress remains slow. To break out of this inertia, in the upcoming Surface Transportation Reauthorization, Congress should mandate an MBUF system for heavy trucks. There are two main reasons for doing this. First, it would pave the way for an MBUF system for autos and light-duty trucks. Second, and more importantly, it would enable a national weight-distance road tax to be established to ensure that heavy trucks pay the full costs for the road damage they cause, something they do not appear to do now. Doing so would mean an end to market-distorting subsidies provided to trucking, increased revenue for the highway trust fund, and less damage to roads and bridges.

What Is an MBUF System?

America’s roads are paid for through a variety of means: fuel taxes, tire taxes (for trucks), vehicle registration fees, tolls, general fund revenues (including sales taxes), and others. In the last decade, a number of governments, including some foreign and U.S. state governments, have begun experimenting with collecting revenue directly from drivers on the basis of their travel. There are many terms for this, including MBUFs, distance-based user fees (DBUFs), a vehicle miles traveled tax (VMTT), and road usage charges (RUCs). The idea is payments should be based on actual travel, including times of day and roads traveled on. A number of states, including California, Colorado, Delaware, Hawaii, Minnesota, Oregon, Pennsylvania, and Washington, have launched pilot RUC programs, most with partial federal funding, while a number of other states are considering such programs. The U.S. Department of Transportation (DOT) has funded a number of rounds of state RUC pilot programs. A major factor motivating interest in an MBUF system is the concern that with the expected rise of more fuel-efficient vehicles, especially EVs, governments will be unable to collect adequate revenues to support transportation infrastructure.

There are two main ways to collect mileage-based fees. The first is based on a simple annual odometer reading, with a fee based on the number of miles a vehicle has driven. This is, however, not the optimal way of collecting the fee, because the costs imposed on the transportation system differ by time of day. Traveling late at night imposes no congestion compared with traveling at 8:30 AM on an urban freeway. And for heavy trucks, traveling on roads not designed to handle such vehicles imposes significant costs. This is why the National Surface Transportation Infrastructure Commission recommended that Congress support the transition to a national MBUF system based on onboard units (OBUs) that incorporate a connection to A vehicle’s onboard diagnostic (OBD) port, cellular communications, and a GPS receiver.[2] Every car produced since 1996 coming equipped with what is known as an OBD II (second-generation OBD) port makes this approach technically viable. These systems are currently used, for example, to support certain auto insurance programs that charge by how customers drive, wherein a “dongle” is inserted into the OBD port to measure travel behavior. And as most new vehicles already come equipped with a GPS chip (for example, to inform a vehicle’s onboard mapping display system), the charges can be based on the actual road a car has traveled on.[3]

Such a system would work as follows. New vehicles would come equipped with an OBU, a GPS receiver, and cellular-communications capability. In new vehicles, the OBU (or the vehicle’s mapping system) would contain a database with all the roads in the United States and information on prices for each segment, including by time of day and what entity (local, state, and federal government or private toll operator) would receive the payment. When jurisdictions change road prices, regular updates would be downloaded to the OBUs. The OBU would calculate payments to all the jurisdictions based on the road segments a vehicle drove on and the price of the segment at the time of travel (e.g., $1.30 to Montgomery County, Maryland; $5.15 to the state of Maryland, and $6.47 to the federal government). At the end of each month, a vehicle’s OBU would aggregate the various fees and send a payment to the appropriate local, state, or federal agency—or a private-road owner—by automatically charging the vehicle owner’s credit card or bank account. For individuals without a credit card or bank account, the total payment amount could be added to their annual or biennial vehicle registration fees.

Importantly, the only personally identifiable information the entities would receive would be payments—not time of day or roads traveled. Moreover, the default setting for the OBU could be to automatically delete all trip data after monthly payments are made and received, or following some fixed period after that so travelers can check and dispute any charges they believe were made in error. Other complementary systems could also be established—or evolve as technology evolves. For example, a system would need to be developed to enable drivers who have neither a bank account nor a credit card to participate and pay. In other words, despite the common narrative, an MBUF would protect privacy and be more private than current EZ-pass toll systems.

Why Trucks?

A key benefit of deploying a GPS-based MBUF system would be the ability to better align the costs heavy trucks impose on the transportation system with the fees they pay. Economists in general, and transportation economists specifically, agree that economic allocation efficiency is maximized when prices reflect costs imposed. If an economic activity is subsidized—in the case of heavy trucks, by not paying the full costs they impose—the economy will be less efficient and overall output will be less.

It is clear that heavy vehicles impose greater costs. As one academic study states, “As road wear is very tightly controlled by axle load, it becomes apparent that larger vehicles such as [heavy goods vehicles] and buses will have a much greater impact than cars, relative to the vehicle weight.”^[4] This is in part because the study reinforced the finding that passenger cars do almost no damage to roads. Indeed, one study refers to a general finding that that a five-axle tractor/semi-trailer has a pavement impact equivalent to 9,600 passenger cars.^[5] However, more careful analysis finds that this is only on a very small share of the U.S. highway system. The ratio on most roads is in the range of 300 to 1 (1 truck causes as much damage as 300 cars), but even at this lower number it is still large.

It would be one thing if these heavy damage vehicles were also paying their share of the total costs, but it appears they do not. A 2000 addendum to a Federal Highway Administration highway cost allocation study finds that 80,000-pound trucks underpay by 20 percent, and 90,000-pound trucks underpay by 50 percent, noting, “Any future increase in Federal fuel taxes without corresponding increases in taxes on the heaviest trucks will further exacerbate the underpayment of Federal user fees by heavy trucks.”[6]

State studies have found similar levels of underpayment by freight trucks. A 2015 study of Indiana roads by Purdue University finds that heavy vehicles do not pay their fair share.[7] A 2021 study for the North Carolina DOT finds that:

single-unit trucks with four or more axles (FHWA class 7) and all multi-unit trucks classes (FHWA classes 8-13) underpay by 37%–92% for highway infrastructure compared to the damage they cause. In summary, lightweight vehicles are currently subsidizing the cost responsibility of most trucks on North Carolina’s highway system.[8]

The Texas Legislature recently charged Texas DOT and the Texas Transportation Institute to determine whether heavy trucks pay their “fair share” (e.g., payments equal to the costs they impose). And the study finds, perhaps to no one’s surprise, that they do not. As the lead author of study stated, “The big takeaways are that, not surprising, commercial trucks and oversized trucks have more damage cost associated with them than revenues. So there is a loss there. There is a deficit.”^[9] In other words, the state is losing money and drivers of passenger vehicles, including low-income drivers, are subsidizing trucking companies.

Finally, in the Infrastructure Investment and Jobs Act (IIJA), Congress charged the U.S. DOT with conducting a cost allocation study to update the federal numbers. Unfortunately, DOT appears to be making slow progress, as they are in the “early planning stages.” It is critical that DOT complete this study in time for Congress to incorporate the results for the next surface transportation reauthorization bill.

How Would a Truck MBUF System Work?

A successful truck MBUF system would be designed such that trucks over a certain size and weight would be required to have an OBU that would tell itself where the truck is, the time of day and day of week, and the segment of roadway the truck is traveling on, along with its price. In addition, trucks would be required to have sensors to measure weight per axle. Trucks would pay based on a number of different factors: the truck axle weight (heavier trucks would pay more); emissions per mile (“dirtier” trucks would pay more); types of roads (trucks would pay more to travel on roads not designed for heavy trucks); and total miles driven. They could also be charged according to the amount of congestion, with higher prices for driving on roads that are normally congested (e.g., metropolitan freeways or city centers during rush hours). The system could be set up to collect and remit both state and federal taxes. Charges should be set to ensure that the chronic subsidization of heavy trucking is eliminated and that trucks assume their full responsibilities—but at the same time, don’t raise fees so that trucks are subsidizing passenger car drivers.

Implementing a truck MBUF now is important with the development of either hydrogen or battery-operated heavy-duty trucks. One study of the impacts by Scottish university researchers finds that “there will be significant and quantifiable additional costs of road maintenance due to the increased weight of ZEVs [zero-emission vehicles] over ICE [internal combustion engine] vehicles. This will be markedly greater for BEVs [battery electric vehicles] than for HFCEVs [hydrogen fuel cell electric vehicles].”[10] They noted that this only applies to heavy trucks and not cars and light trucks.^[11]The researchers also found road damage from BEVs to be 31 percent higher than from ICEs and 6 percent higher than from HFCEVs.

The benefits from a heavy-truck MBUF would ultimately be a decrease in pavement damage, reduced air emissions, and less road congestion. In addition, it would lead to a more efficient national freight transportation system, as shippers would pay the true cost of shipping, not one based on government subsidies, and in turn choose the most efficient form of transportation for each shipment.

Such a truck MBUF system is something both conservatives and liberals should support. Conservatives should support it because of their general support for free markets to determine economic outcomes. Effectively subsidizing freight trucking by paying for roads with general fund revenues and letting trucks not pay their full cost of the damages they impose is essentially picking winners and losers. It lowers the cost of trucking and raises the relative cost of rail and shipping, distorting free market forces. The market—buyers of transportation services—should be making these decisions, not Congress.

Liberals should support a truck MBUF because doing so would mean less pressure on the federal highway trust fund and state transportation budgets that get increasingly paid by boosting car registration fees and gas taxes. Given that low-income Americans who own a car drive fewer miles on average than do higher income Americans, registration fees are a regressive way to fund the roads—and it would on net reduced greenhouse gas emissions.

Trucking Industry Opposition

Any industry that is protected or subsidized by government has a major stake in protecting those advantages, and the trucking industry is no different. In their advocacy against a truck MBUF, they make a number of flawed arguments.

Claim 1: Trucking Already Pays a Lot

The trucking industry claims that since trucks already pay a lot in various fees that any increase is unfair. But that’s a bit like someone saying they already pay a lot on their mortgage, even though the payments don’t cover the principle. The issue is not how much truckers pay, or what the trends in payments are; it’s how much do they pay relative to the costs they impose? And as noted, the evidence suggests that the industry does not pay enough.

Of course, the trucking industry cries that it would be discrimination if they were to have to pay more and have an MBUF. As a top official at the American Trucking Association wrote in a letter to Congress:

Our industry has long said we are willing to pay our fair share to finance needed improvements to our infrastructure, and we support increasing user fees. However, as we made clear when this type of tax was floated and scuttled last year, we are unwilling to be singled out with discriminatory truck-only fees to pay for our nation’s infrastructure needs and will strongly oppose any effort to do so.[12]

If he were complaining about the possibility of Congress raising their fees above what their actual costs were, then he would have a leg to stand on. But complaining that Congress might raise their fees to cover the costs of the damage they are causing is like a person who broke a window complaining to the judge that it is unfair for them to have to pay the full cost of repairing the window: “That’s discriminatory. Can’t I just pay half and have all the neighbors pay the rest?”

Claim 2: Increased Prices for Consumers

The industry plays the small trucker sympathy card, claiming wrongly that increased fees (to match the costs they impose) would put independent truckers out of business and raise costs for consumers. But, by definition, they can’t do both. Either truckers absorb the higher fees or they don’t. The reality is that if truck costs go up, two things will happen. First, at the margin, there will be a shift to other shipping modes for particular routes where they are inherently more efficient (air, rail, or ships). The reason the new choices would be more efficient is that, by definition, if a shipper has to choose between non-subsided modes of shipping, they will choose the most efficient and lowest cost. This market-based shift will mean higher productivity and a larger gross domestic product (GDP)  because the economy is able to ship the same amount of goods with fewer resources dedicated to it.

Second, to the extent costs go up for the routes on which shippers still use trucks, by definition, the costs will get passed on to consumers, as long as trucking markets are competitive. While the industry may not be able to pass along all the costs of targeted tolls to customers in the short run, truckers should be able to do so in the moderate term and long term if the fees are stable or changed with sufficient advance notice. If they don’t pass the costs along, it is an indicator of anticompetitive market power. Indeed, a Transportation Research Board report argues that these costs could be passed on to customers.[13] In other words, stable, nondiscriminatory pricing, possibly supported by national information systems that let truckers and shippers know the expected costs of tolls for any particular route, should not adversely affect the trucking industry as a whole—and would certainly not adversely affect the national freight shipping industry. One reason is that a per-mile pricing system would create incentives to combine shipments in ways that minimize trip mileage. For example, the German heavy-vehicle comprehensive road pricing system has led to a 10 percent drop in empty trucks on long-distance trips, a 7 percent increase in containers moved by train, and a 6 percent increase in the purchases of truck tractors that emit less pollution (in part because their fee was higher for trucks with low mileage per gallon).[14]

But that is not the full story. Because trucks would now be paying more in road fees, automobile and light-duty truck drivers and taxpayers would pay less, completely canceling out any increase in shipping costs. Any argument that consumers will suffer from ending truck subsidies is just wrong.

Finally, because trucks would be paying the true cost they impose on the transportation system, there would be less road damage, in part because they would, at the margin, switch to more efficient and less damaging transportation, such as fewer empty loads, more freight on trucks with more axles, and less driving on roads that are damaged more. The result of that, of course, is American taxpayers having to pay less to repair roads and instead that money being returned to them in the form of either tax cuts or increased public spending on things such as education.

Conclusion

As Congress crafts reauthorization of the Surface Transportation Act, it should include a mandate for DOT to establish and implement a mandatory nationwide weight-distance tax that would use modern technology to charge trucks by the weight of the axles on each truck, the distances travelled, and the particular types of road a truck was on.

The virtue of a truck-first VMT system is that it is technically much more straightforward than a national system on all passenger cars. Trucks already have GPS. The cost of installing an onboard “computer” to measure costs and payments would be relatively small compared with the costs of a truck cab. Moreover, once such a system was up and running and people could see that it worked and had no privacy implications, then public acceptance of a broader VMT system would be greater. And as EVs become a bigger part of the fleet, a way for them to pay for use will be needed.

Endnotes