The Future of Fuel Taxes – What Might Happen as Trucks Become More Efficient

Traditionally, state governments have funded road construction through taxes on fuel. As vehicles become more efficient, though, the income from fuel tax is affected, with long-term concerns that it might eventually become insufficient. An increase in electric cars – and the introduction of electric trucks (Tesla recently unveiled an electric semi-truck) is starting to cause revenues to drop. With more than 90 percent of federal Highway Trust Fund receipts being collected at the pump, this is a very real concern.

So, what are governments doing to solve the problem, and how might it affect truckers and trucking companies?

1. Considering raising the rate. The federal gasoline tax rate has been 18 cents for a long time, and there is discussion about raising it.

2. Implementing a mileage tax – in other words, vehicle owners would be taxed by the distance they drive rather than the fuel they use. Unfortunately, this is likely to be extremely unpopular, not so much because it might be a higher tax, but because it would involve tracking vehicles and thus violate the privacy of individuals. Oregon is trying a voluntary pilot program that can use odometers (but as we all know, odometers can be messed with) or GPS to allow people to pay a “usage tax” and get back their gas tax.

3. HOT lanes. In some urban areas, income is being increased by the use of HOT – High Occupancy Toll lanes instead of traditional HOV lanes. The idea is that you can use the high occupancy lanes even if there are fewer people in the vehicle if you pay a toll – often a high one.

4. Higher registration fees for electric vehicles. This is considered a matter of equity – all-electric vehicle owners do not pay the gas tax and thus should contribute in another way. This fees are relatively low (for example, Colorado charges an extra $50 and North Carolina an extra $100). However, electric vehicles are less of an issue than hybrids and other more efficient gas vehicles.

5. Using some funding from general revenues. Of course, this only works in states that are not already strapped for cash. Using federal funds has the same issues – the money has to come from some other area of government.

6. Raising truck-specific taxes – namely sales tax on heavy-duty trucks and trailers, use fees on trucks using public highways and tax on tire sales for loads over 3,500 pounds. Some people see this as a good idea because heavy-duty trucks do more damage. Some states are also already applying usage and weight taxes on trucks (as trucks are generally tracked by their fleet this causes fewer privacy issues than usage tax on private cars) – which incentivize truckers to take shorter routes and be efficient. However, an increase on sales tax may actually cause fleets to keep older, less efficient trucks in service longer, and an increase on tire tax could cause people to put off replacing tires, with obvious implications for safety.

None of these solutions are likely to replace the gas tax on its own. Instead, we are likely to see a patchwork of measures, different in different states. However, we may in the future expect to pay more tolls – including usage fees, higher vehicle registration fees, and a higher tax on fuel. Whether this will make driving (and thus shipping) more expensive is up in the air, but federal and state governments will need to continue to raise money to pay for roads even when and if we stop using gas and diesel altogether. An all-electric future (which is unlikely as people cling to older vehicles) will still require the same expenditure on roads as we have today.