Balancing Connecticut’s budget on the backs of the trucking industry and commerce is a game that Governor Ned Lamont just can’t quit. In 2018, he ran on instituting a trucks only toll, similar to the outrageous system that is in place in Rhode Island, but backed off the plan as it became obvious that it was nothing more than a money pit. Now he’s back with a new idea, a Highway Use Tax (HUT) for heavy vehicles:
“Under HUT, operators are charged a rate, determined by the weight of the truck, for the number of miles driven in the state. The State of New York has nearly identical system which has been in place for decades. The Connecticut HUT will be imposed specifically on classifications 8 through 13, which weigh 26,000 pounds and above. Rates will increase incrementally from 2.5 cents per mile at 26,000 pounds to 10 cents per mile at 78,001 pounds. Operators of trucks which are classified overweight (over 80,000 pounds) will pay an additional 7.5 cents for a total of 17.5 cents per mile. The budget anticipates a start date of January 1, 2023, with an estimated $45.0 million to be collected in FY 2023. Annualized revenue is approximately $90.0 million per year.”
Some further research into New York’s HUT shows how deeply flawed it is, and why it would be devastating for Connecticut. The antiquated HUT represents a lose-lose for both the industry and the state because compliance is an extremely burdensome ordeal that creates a culture of evasion. The administrative costs amount to about $16 per truck and it is costlier for the state to administer than fuel taxes and registration fees. In fact, in 2015, New York took in 35 percent less in revenue from the tax than it should have, a loss of $55.6 million in just that year alone
The evasion rate is, by its nature difficult to pin down. A study conducted by the American Traffic Research Institute (ATRI) from 2008 put it between 45%-53% for a resulting loss of $120 million. This puts New York carriers at a competitive disadvantage because it is far more likely that New York companies are the ones who are audited and are also the ones less likely to evade the tax in the first place. Essentially out of state carriers double dip by being more likely to evade the tax and less likely to be punished for evasion.
Compounding the issue if an out of state company fails to report their New York miles and evades paying HUT, they are also failing to pay other mileage-based taxes such as the international fuel tax agreement (IFTA) and the international registration plan (IRP), decreasing revenue to the state.
Lastly, A lawsuit won by the Owner Operator Independent Diver’s Association (OOIDA) resulted in a $44.4 million refund significantly reducing the revenue New York will receive via HUT moving forward. New York should be phasing out HUT, states should not be looking to replicate it.