Discuss the rationale and problems associate with assessing user charges against carriers

Answer 1

User charges are present in the highway systems in several forms. A major form is the fuel tax. States look to this per-gallon tax as a major revenue source for highway construction and maintenance. The federal government's fuel taxes go to the Federal Highway Trust Fund, which is the financing source for the Interstate Highway System. Some states have switched from a per-gallon to a percent of sales price method of fuel-based taxation because, in recent years, the number of gallons of fuel sold has decreased, leaving state agencies with less revenue in times that demand greater highway maintenance. The percent of sales price approach can avoid much of this decline. Another public revenue source is the federal excise tax on vehicle tires. States also obtain revenues through vehicle registration fees. These mostly are assessed on a vehicle weight basis so as to recoup, somewhat, a proportionate share of construction costs related to heavier versus lighter vehicles. Further, some states assess a ton-mile tax (e.g., Oregon). Finally, tolls are a form of user taxes on turnpikes and many bridges.

Two major controversies are taking place with regard to highway user charges. One concerns the Federal Highway Trust Fund. The tax money that goes into this fund is collected primarily for interstate highway construction. Approximately 96 percent of the interstate system has been built, but doubt exists over whether the remaining portions, mostly very costly urban sections, will ever be built. Meanwhile, the fuel tax continues to be collected and accumulated in the fund.

A second problem with user taxes is on the state level. Most states collecting vehicle fees and vehicle taxes only return a portion of them for highway purposes. Some states have earmarked some of these funds for education and other uses. In addition, industry groups continue to seek a greater share of these funds for highway development and improvement.