Commission Testifies on Using Freight Fee, Customs Duties, Fuel Tax to Upgrade Transportation System
On April 22, 2008, members of the National Surface Transportation Policy and Revenue Study Commission testified before the Senate Commerce, Science and Transportation Committee regarding the Commission's January 2008 report which, among other things, recommended various fees for sustaining the surface transportation system in the U.S.
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(The Commission recommended a minimum 25 rise in fuel tax over the next five years; a federal freight fee, and using a portion of customs duties on imports to the allow the U.S. to invest at least $225 billion annually from all sources for the next 50 years1 to upgrade the existing system to a good state of repair. See ITT's Online Archives or 01/23/08, 08012300, for BP summary of the Commission's report and its recommendations.)
Using a Portion of Customs Duties
The Commission members' testimony indicated that using a portion of Customs duties to fund the transportation system would:
Affect all ports equally. Customs duties, with established collection and administration, have the benefit of not displacing freight between ports of entry.
Generate up to $3.6 billion a year. Dedicating 5% of current Customs duties for investment in freight projects would generate about $1.8 billion annually and $20 billion cumulatively through 2017. Dedicating 10% of current Customs revenues would yield $3.6 billion annually and $49 billion cumulatively through 2017.
Federal Freight Fee
Various Commission members testified on using a federal freight fee, stating that:
National scope. Congress should ensure that local and state proliferation of freight fees are, in general, preempted. A national freight fee is preferred to individual state fee initiatives that are now emerging in several states, which may inadvertently distort global trade flows and result in diverting congestion from one port region to another. A national fee is the best way of keeping a level playing field across national freight networks.
Affects ultimate consumer. A fee must be designed to ensure that the ultimate consumer bears the cost. This means that any freight fee is paid by the beneficial cargo owner, not transportation intermediaries such as steamship, trucking, or rail companies. An issue with fees assessed against carriers is their inability to pass these fees on in a competitive marketplace, which will result in reducing their ability to re-invest.
Fee and projects should be linked. Congress should create an accountable and transparent programmatic linkage between an assessed freight fee and the selection and funding of projects that facilitate growing trade-driven freight volumes.
Federal Fuel Tax
Certain Commission members testified on the use of a federal fuel tax to help sustain the U.S. surface transportation system, stating that:
Primary source of funding. The primary funding source for highway infrastructure needs should remain the federal fuel tax, both on gasoline and diesel fuel.
Low administrative cost. The fuel tax has low administrative and compliance costs; ability to generate substantial amounts of revenue; relative stability and predictability; and ease of implementation.
Other taxes. In the long-term, however, the Commission envisions transitioning from motor fuel taxes to a vehicle miles traveled (VMT) tax; and in the interim, recommends no longer relying almost exclusively on motor fuel taxes but instead relying on a broad range of user-related fees and charges.
1The U.S. is spending less than 40% of this amount today.
Testimonies of Commission members (dated 04/22/08) available at http://commerce.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=215ce506-54df-4d1a-9b1b-48635e336c68