This report contains the findings and conclusions of an analysis of highway tax equity. The study was mandated by Senate Joint Resolution 50 of the 1980 session. An interim report on the study methodology was provided to the General Assembly in January 1981.

In order to carry out the study a project team headed by JLARC research staff was established. Engineering and technical expertise was provided by the Department of Highways and Transportation, the Virginia Highway and Transportation Research Council, and the Department of Motor Vehicles. In addition, comments and technical suggestions were sought from an advisory committee representing a cross section of highway interests.

The analysis found that Virginia’s highway tax structure is essentially equitable in that the total imbalance between costs and revenue is only three percent. Passenger cars and panel and pickup trucks overpay their responsibility slightly, while tractor-trailers underpay their responsibility by less than one percent. Medium weight trucks underpay by substantial percentages which range up to 38 percent for two-axle, six-tire vehicles. These vehicles are a relatively small proportion of highway users and their underpayment does not greatly affect the total equity imbalance. Nevertheless, the General Assembly may wish to review the tax structure as it applies to these highway users to address equity concerns.

Examination of the cost responsibility study results projected for the range of likely spending in FY 1984 shows that the equity relationships could be kept fairly stable through the mid-decade. In other words, although Virginia is facing both real declines in its highway program and increased emphasis on rehabilitating older roads, the shift in spending priorities will not, by itself, greatly affect the overall equity relationships. Care should be exercised, however, in examining any future highway tax proposals to evaluate their equity implications.

Cost responsibility analysis needs to take into consideration the dynamic fiscal and technological environment of highway tax policy. Changing factors such as vehicle design, travel patterns, and economic conditions will alter the equity relationship over time. Therefore, examination of highway user costs and revenue contributions should be repeated periodically. An updated study should be completed in 1985 for use in the 1985-88 budge review.