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How Should Heavy-Duty Trucks Be Taxed?

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  • Parry, Ian W.H.

    (Resources for the Future)

Abstract

This paper develops and implements an analytical framework for estimating optimal taxes on the fuel use and mileage of heavy-duty trucks, accounting for external costs from congestion, accidents, pavement damage, noise, energy security, and local and global pollution. The analysis allows for endogenous fuel economy, increased auto travel (and externalities) in response to reduced truck congestion, and it distinguishes driving by truck type and region. We estimate the optimal (second-best) diesel fuel tax is $1.12 per gallon, and implementing it increases welfare by $1.34 billion per annum. However, optimizing over both fuel and mileage taxes, and differentiating mileage taxes by vehicle type and region, yields progressively higher welfare gains. The most efficient tax structure involves a diesel fuel tax of 69 cents per gallon and charges on trucks that vary between 7 and 20 cents per mile; implementing this tax structure yields welfare gains of $2.06 billion.

Suggested Citation

  • Parry, Ian W.H., 2006. "How Should Heavy-Duty Trucks Be Taxed?," RFF Working Paper Series dp-06-23, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-06-23
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-06-23.pdf
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    Cited by:

    1. Andre De Palma & Moez Kilani & Robin Lindsey, 2006. "The Economics of Truck Toll Lanes," ERSA conference papers ersa06p896, European Regional Science Association.
    2. Clifford Winston, 2013. "On the Performance of the U.S. Transportation System: Caution Ahead," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 773-824, September.
    3. Blemings, Benjamin T. & Bock, Margaret & Scarcioffolo, Alexandre, 2022. "Hoggin' the Road: Negative Road Externalities of Pork Slaughterhouses," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322466, Agricultural and Applied Economics Association.
    4. Parry, Ian & Strand, Jon, 2012. "International fuel tax assessment: an application to Chile," Environment and Development Economics, Cambridge University Press, vol. 17(2), pages 127-144, April.
    5. Paul Koster & Erik T. Verhoef & Simon Shepherd & David Watling, 2014. "Probabilistic Choice and Congestion Pricing with Heterogeneous Travellers and Price-Sensitive Demand," Tinbergen Institute Discussion Papers 14-078/VIII, Tinbergen Institute, revised 13 Nov 2014.
    6. Luechinger, Simon & Roth, Florian, 2016. "Effects of a mileage tax for trucks," Journal of Urban Economics, Elsevier, vol. 92(C), pages 1-15.
    7. Georg Hirte & Stefan Tscharaktschiew, 2015. "Optimal Fuel Taxes and Heterogeneity of Cities," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 35(2), pages 173-209, October.
    8. De Borger, Bruno & Mulalic, Ismir, 2012. "The determinants of fuel use in the trucking industry—volume, fleet characteristics and the rebound effect," Transport Policy, Elsevier, vol. 24(C), pages 284-295.
    9. Guerrero, Sebastian E. & Madanat, Samer M. & Leachman, Robert C., 2013. "The Trucking Sector Optimization Model: A tool for predicting carrier and shipper responses to policies aiming to reduce GHG emissions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 59(C), pages 85-107.
    10. Koster, Paul & Verhoef, Erik & Shepherd, Simon & Watling, David, 2018. "Preference heterogeneity and congestion pricing: The two route case revisited," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 137-157.
    11. Robin Lindsey, 2010. "Reforming Road User Charges: A Research Challenge For Regional Science," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 471-492, February.
    12. Wu, Huiting & Colson, Gregory & Escalante, Cesar & Wetzstein, Michael, 2012. "An optimal U.S. biodiesel fuel subsidy," Energy Policy, Elsevier, vol. 48(C), pages 601-610.
    13. Christian Balcells, 2022. "Determinants of firm boundaries and organizational performance: an empirical investigation of the Chilean truck market," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 423-461, April.
    14. Roberton C. Williams III, 2016. "Environmental Taxation," NBER Working Papers 22303, National Bureau of Economic Research, Inc.
    15. Mark Lijesen & Victoria Shestalova, 2007. "Public and private roles in road infrastructure: an exploration of market failure, public instruments and government failure," CPB Document 146, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Wang, Hua & Meng, Qiang & Zhang, Xiaoning, 2020. "Multiple equilibrium behaviors of auto travellers and a freight carrier under the cordon-based large-truck restriction regulation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 134(C).
    17. Galvin, Ray & Martulli, Alessandro & Ruzzenenti, Franco, 2021. "Does power curb energy efficiency? Evidence from two decades of European truck tests," Energy, Elsevier, vol. 232(C).
    18. Dumortier, Jerome & Zhang, Fengxiu & Marron, John, 2017. "State and federal fuel taxes: The road ahead for U.S. infrastructure funding," Transport Policy, Elsevier, vol. 53(C), pages 39-49.
    19. de Palma, André & Kilani, Moez & Lindsey, Robin, 2008. "The merits of separating cars and trucks," Journal of Urban Economics, Elsevier, vol. 64(2), pages 340-361, September.
    20. Santos, Georgina, 2017. "Road fuel taxes in Europe: Do they internalize road transport externalities?," Transport Policy, Elsevier, vol. 53(C), pages 120-134.
    21. Muehlenbachs, Lucija & Staubli, Stefan & Chu, Ziyan, 2021. "The accident externality from trucking: Evidence from shale gas development," Regional Science and Urban Economics, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    truck tax; diesel tax; external costs; welfare gains;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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