The Revenue Resources and Economic Commission (RREC) study updates and extends a 1976 RREC study which examined the equity of the Virginia taxation structure with regard to several transportation modes. (*l)

The issues examined in this report are limited to (1) the equity between classes of highway users in terms of costs to the system and revenue paid to the system, and (2) the adequacy of the present level of highway financing given the marginal highway replacement and maintenance costs.

With regard to automobiles, it was estimated that automobiles together with passenger carrying vans and light trucks (less than 7,500 pounds GVW) paid federal and Virginia highway user taxes in 1976 and 1978 of 1.33 cents per mile. However, the estimated federal and Virginia allocated costs per mile in 1976 and 1978 for these lightest vehicles were 2.17 and 3.57 cents per mile, respectively. Thus, it is estimated that in 1976, automobiles and light trucks covered approximately 61 percent of their allocated highway cost responsibility under the incremental cost allocation method. Because of rapidly increasing construction and maintenance costs, passenger carrying vehicles covered only 37 percent of their highway cost responsibility in 1978. The 1976 RREC study did not estimate automobile user taxes or costs.

As a basis of comparison, in 1964 the allocated costs of automobiles were estimated to be 1.10 cents per mile and the estimated revenues were 1.53 cents per mile. Automobiles covered 130 percent of their allocated costs in 1964 as opposed to 37 percent in 1978.

Estimates of motor carrier allocated costs and highway user tax payments were also made. Because the Division of Motor Vehicles was unable to supply 1978 registration and Sales and Use Tax data in time for this study, only 1976 results were available at the time of printing. Data for 1978 will be supplied to interested parties by the authors upon request, when available.

Table 10 summarizes the results. Like the previous RREC study, it was found that Virginia-domiciled, ICC certificated common carriers came close to covering their allocated costs in 1976. Their total allocated costs were estimated to be 8.33 cents per mile, while their Virginia and federal user payments were estimated to be 7.47 cents per mile. Despite increased weights, it was found that 1976 Virginia-based motor carrier user tax payments per mile actually declined from 1970 and 1973 due to increased fuel efficiency and Virginia IRP membership. When Federal user taxes are excluded, the decrease in Vi rgi ni a user tax payments by Virginia carriers becomes more pronounced. It is estimated that per mile payments to Virginia decreased from 5.43 cents per mile in 1973 to 4.76 cents per mile in 1976.

One finding of the 1976 RREC study was the disparity between taxes paid by motor carriers domiciled in Virginia and those domiciled out of state.

Virginia's participation in the International Registration Plan was predicated on narrowing this disparity.

An examination of Table 4 leads one to conclude that the disparity has somewhat narrowed. Whereas, foreign-domiciled carriers were found to have paid 2.06 cents per mile and 2.42 cents per mile to the Commonwealth in 1970 and 1973, respectively, foreign-domiciled carriers from IRP states were found to have paid 3.10 cents per mile in 1976 to the Commonwealth. Thus, the disparity between IRP foreign and non IRP foreign and Virginia-domiciled trucks found in 1973 narrowed from 124 percent to 54 percent in 1976. The narrowing is the result of both increased payments per mile by non-resident, IRP state based carriers and decreased payments by Virginia carriers.

When 1976 Virginia and federal user payments per mile are totaled, IRP-state based, ICC certificated carriers paid 5.72 cents per mile, while their non-IRP state counterparts paid 5.46 cents per mile. Their estimated allocated costs per mile were 8.66 cents. Thus, these carriers covered 66 and 63 percent, respectively, of their estimated allocated costs per mile.

Road tax payments in 1976 for the sampled carriers were also estimated for al1 states and states other than Virginia. In general, as would be expected, non-resident carriers paid higher user payments per mile to other states than they did to Virginia.

Al1ocated costs for motor carriers were also estimated assuming the use of 80,000 pound units on Virginia highways. Using a linear extrapolation method, the authors estimated that the total allocated construction and maintenance cost per mile in 1978 for a 3-S2 diesel powered, for-hire vehicle increases from 17.05 cents per mile at 66,000 pounds to 20.46 cents per mile at 80,000 pounds. If 25 percent of the 3-S2 fleet mileage is done with vehicles weighing 80,000 pounds, then the foreign-domiciled, ICC certificated carrier allocated costs in 1978 increase from 14.56 cents per mile to 15.l cents per mile.

While 1978 revenue estimates for motor carriers are not available at the time of printing, it is anticipated that they will differ little from the 1976 estimates. Estimated automobile payments per mile remained unchanged at 1.33 cents per mile between 1976 and 1978. However, as shown in Table 10, estimated allocated costs in 1978 are significantly higher for each class of highway user because of increased construction and maintenance costs. For instance, the Virginia Highway Construction Index increased from 182.6 in 1976 to 311.9 in 1978 (1967 = 100.0). Thus, a major gap has developed between highway trust fund payments and allocated costs, with the difference made up through disinvestment in highways. If revenues for Virginia-domici1ed ICC certified carriers are assumed unchanged in 1978 from the 1976 estimates, then whereas the carriers were estimated to cover 90 percent of their allocated costs in 1976, by 1978, they would have covered only 53 percent of their allocated costs. Nonetheless, this coverage would still be higher than that of automobiles in Virginia.
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(*1) George E. Hoffer and Charles J. Gallagher, Transportation Taxation in Virginia: An Interstate-Intermodal Analysis, Revenue Resources and Economic Commission, Richmond, Virginia, 1976.