As we know, between inflation and Russia’s invasion of Ukraine, gas prices are at record highs. Many New York lawmakers of both parties are looking to give motorists a break by temporarily suspending the gas tax. Well sort of, see there is not a gas tax in New York, rather four separate state taxes add up to 33.35 cents per gallon this year. That one of the highest tax bills in the nation, with another 15 cents (typically) added in at the local level. State lawmakers only can suspend the 33.35 cents tax.
This is undeniably a nice gesture by elected officials to acknowledge the hardship of their constituents and when budgets are tight, and costs are rising every little bit helps< but that does not make it the most prudent thing to do. The issue is that the gas tax funds mass transit, roadway repair as well as servicing current debt held by the state for past projects. Cutting off gas tax revenue in the short term may very well lead to shortfalls later. Now, given the Federal Infrastructure bill, it may very well be possible to organize a tax holiday while ensuring roadwork, transit, and debt obligations are satisfied. It would not be the first clever bit of accounting to come out of Albany. Still, just because they might be able to do this, does not mean that it is a good idea.
Though there is something that Albany could do which would offer a major relief to the trucking industry, and as such, help ensure that delivery costs don’t jump too high to compensate for diesel spikes. That would be to eliminate the Highway Use Tax (HUT).
New York State is the third most expensive state in the nation in terms of operating a truck. One of the reasons for this is that New York is one of only five states that has a HUT. The antiquated HUT represents a lose-lose for both the industry and the state because compliance is an extremely burdensome ordeal which 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.
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.