California is currently investigating the potential to use a Road Use Charge (RUC) as an alternative tax instrument to replace fuel tax. This report examines potential RUC scenarios for heavy duty commercial vehicles and conducts an economic impact analysis to estimate the economy wide and distributional impacts of the various scenarios. Our purpose is to explore the differences in RUC relative to current state fuel and weight fees in terms of revenues generated, changes in cost sharing among truck classes and commodity categories, and implications to the State economy as well as households from different income groups.
The study indicates that for revenue-neutral scenarios, since the only change is the redistribution of the costs, the economy-wide aggregate impacts in terms of changes in GSP and employment are very small. For the scenario that emission fees are added on top of the revenue neutral RUC fees, negative economic outcomes can be expected even after the stimulus offset effects from the spending of the additional government revenues. The income distributional analysis indicates that maintaining the current discounted charge rate applied to Agriculture Products help reduce income inequality. Moreover, income losses stemming from transportation cost increase caused by the emission fees are born disproportionately by middle- and higher-income groups, and thus reduce the income inequality.
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