What Challenges Will Road Usage Charging Pose for Transportation Agencies?

When you start talking about the impacts of road usage charging (RUC) implementation and compliance on a department of transportation (DOT), you need to put aside the technology for a bit and focus on the business side of RUC.

At the end of the day, RUC is the collection of taxes, and when it comes to how we collect taxes in the U.S., it’s a question of accuracy and fairness. When you have income taxes, it’s very definitive: you make this much, you pay this. Sales taxes are also very simple because everyone pays the same percentage for a sales tax, and then there are tolling and gas taxes. 

But now that we have electric and hybrid vehicles, we’re starting to see accuracy become an issue, because traditional, fuel-based taxation models don’t account for electric or hybrid vehicles. That’s why usage taxes such as RUC are viewed by many transportation leaders as more accurate and fairer to motorists who use the roads.

Stopping the Leakage

If you look at how we collect taxes today for transportation, there are about 1,450 terminal control locations where fuel is sold in bulk, and each one of those is taxed. But how do you collect taxes based specifically on vehicle usage or ownership, which is on a much larger scale than those terminal control locations?

There are several possible solutions on the business side of this situation. There are collections at departments of motor vehicles (DMV), self-reporting through IRS forms and even potential third-party agencies that can track these tax collections, to name a few. Recent pilot programs are further defining solutions as we better understand collecting and auditing those fees.

But another issue with RUC is “leakage.” Right now, when you collect out of 1,450 well-defined locations, there should be very little leakage because taxes are collected at those locations. But when you start charging taxes on hundreds of millions of vehicles, there’s going to be some people that don’t end up paying.

That’s the leakage, and that needs to be addressed.

As a leader of some of the country’s largest and most successful RUC pilot programs, WSP is looking to provide a national solution that’s focused on the accuracy in collecting these taxes.

There are several ways of doing this. One is through the DMV, where drivers either pay their taxes or don’t get their license plate renewed. If they still refuse to pay, then somewhere down the road police will pull them over and they’ll be forced to pay their fees and any fines that are accrued through noncompliance.

But the question then is who owns the leakage? Is it the state that’s collecting the taxes, or the federal government? Does the account manager own any of the leakage? It’s an issue that’s coming up as you start looking at the collection of taxes through anything else other than a gasoline tax.

Another issue for agencies is enforcement. If you’re collecting taxes today, it’s simple how it’s enforced, with easily understood consequences.

All this needs to be considered when looking at pilots and programs, and it’s not just an option for us as a country. This transition to usage-based taxing is a must because of the explosive adoption of electric vehicles.

Right now, individual states are conducting pilots and programs focused on the collection of taxes within their state. They have different types of programs, and what we need to do is develop a consistent model that focuses on how we need to collect taxes at a national level.

Don’t get me wrong, the states conducting their pilots and programs are doing a fantastic job so far and we’re learning a lot from them. But the national pilot is where the solution for the U.S. is going to become emergent and very apparent, with financial and data interoperability as one of the key objectives.

There’s going to be this push-pull one day about the cost of developing a highly accurate solution, in which drivers are only charged for the miles they drive, versus a simpler solution, like a flat, annual rate for each vehicle that’s less expensive to administrate. But when the person who drives a car 10 miles a week is paying the same as the person who drives 1,000 miles a week, it’s clear that the latter option is far from a fair way to collect revenue.

The national trial is so important because we live in a federated country where each state can operate in the way that best suits the residents of that state and the federal government helps ensure that states operate freely and fairly with each other under an umbrella of reasonable regulations. It is those regulations that a national RUC pilot will determine.

I think that national program is going to flesh out very specific ways we collect this revenue in the future.

For more information, please check out WSP's Road Usage Charging page. 

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