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OCR for page 79
Alternative Approaches to Heary Vehicle Taxation
Applications Manual- Summary Evaluation
10.0 Summary Evaluation
This chapter provides an illustration of how the results of the separate evaluations of tax
alternatives for each of the six criteria can be brought together, synthesized, and analyzed
in a more integrated manner to assist decision maters. The objective is not only to assist
in selecting a good tax alternative for the state or region, but also to assist in refining the
heat tax alt~rnative.~ bv analv7.in~ traclenff.c' that might unprove the alternatives.
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The example that follows is taken from the last section of Chapter 7 of the Final Report.
That section presents a summary of qualitative evaluations of four generic tax alternatives
that do not include specific tax rates or schedules. Therefore, it is a simplification of the
more specific evaluation Drocess that win be involved In most evaluations of actual tax
systems.
. .
Exhibit 10.1 presents a simplified summary of the evaluations of three of Me heavy
vehicle taxation systems presented in the Final Report. The fourth system, a toll system, is
very different from the other systems) and our evaluation of it is less readily summarized
in a table; instead we present a verbal summary of this system below.
Exhibit 10.1 shows a rating of each system's potential for satisfying each of the six
evaluation cntena. The ratings are on a scale of one (poor) to five (excellent). The
footnotes to the exhibit identify several instances in which the rating in the table does not
apply to all variants of the system. It should be emphasized that the ratings reflect our
evaluations of the potential for each of the prototypical systems to satisfy the various
criteria; they do not measure how well actual tax systems meet these criteria.
Additional information relating to all ratings is provided in the discussions of Sections 7.2
Trough 7.7 of the Final Report. These discussions should be reviewed to understand
both the reasons for our ratings and the conditions under which they apply. (These
discussions also present a number of other observations about the design and
administration of We venous taxation systems. Of particular note is our discussion of the
advantages of integrating administration of Me separate taxes to the greatest extent
practical.)
We focused on the use of tolls as a means of charging for the full social costs of highway use. As
such, tolls are principally of interest for use in highly congested urban areas rather than as a major
component of a statewide or national heavy vehicle taxation system. Furthermore, this interest
primarily reflects the ability of tolls to capture the significant spatial and temporal variations in
social costs, and only secondarily their ability to vary with vehicle size and weight.
Cambridge Systematics, Inc.
79
OCR for page 80
Alternative Approaches to Heady Vehicle Taxation
Applications Manual - Summary Evaluation
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80
Cambridge Systematics, Inc.
OCR for page 81
Alternative Approaches to Heady Vehicle Taxation
Applications Manual- Summary Evaluation
Exhibit 10.! ~nclicates that our ratings differ slightly for Me two principal variants of the
fuel-tax surcharge system (using flat-rate or graduated surcharges) and also for the two
principal variants of the weight-distance tax system (using a conventional weight-
distance (WD) tax or an axle-configuration weight-distance (AWD) tax). Each of the five
tax system variants distinguished in the exhibit does relatively well under some criteria
and less well under others. However, the advantages of the graduated fuel-tax surcharge
system do not appear to balance its very low feasibility rating.- With this one exception,
each of the principal system variants shown in the exhibit appears to- have something to
offer. The choice rests primarily on the relative importance placed on the various criteria.
The fourth major taxation system evaluated in the Final Report would! use toss as a means
of charging for the full social costs of highway use. This system has unique capabilities
for reflecting We significant spatial and temporal variations In the fun somal costs of
highway use; and, as such, it does far better than any of the other systems in meeting We
economic efficiency cr~tenon, at least when electronic toll collection is used. Furthermore,
if, as suggested in Section 7.4 of the Final Report, tolls are set to reflect the difference
between cost responsibility for use of toll facilities and We fuel taxes and other user
charges paid as a result of that use, toll systems can also meet the equity criterion quite
well. However, as discussed In Sections 7.3 and 7.6 of the Final Report, He potential for
ton avoidance makes it very difficult to design toll systems that achieve their economic
efficiency objective in an administratively efficient manner. Also, there is substantial
popular opposition to introducing tolls on facilities that currently are free and to charging
motorists for the external costs of emissions, as well as more moderate opposition to
charging for the external costs of a user's Impact on congestion.
The results of our assessment of the several generic tax systems with regard to the six
criteria can be related to He states' responses to our survey question regarding their
relative ranking of a (somewhat different) list of potential criteria, as reported in
Exhibit 2.6. The average ranking of several of the criteria by the states was fairly close,
narticulariv the rankings of equity among vehicle classes, evasion, responsiveness to
Non, ad~r~nistranve costs, and compliance costs. In contrast, "stability and predict-
ability" (elements of adequacy) were ranked much higher than these four criteria, and
economic efficiency was ranked much lower.
,
,- . - . ·
We do not believe it would be appropriate or useful to attempt to link the results of the
survey of the states with our ranking of the tax systems for each of our criteria to attempt
to find a winning tax system. The set of criteria used in our evaluation process has
evolved over the course of the study and is quite different from the set used in the survey
at the start of the study. Also, states were asked to rank the early set of criteria without
reference to any specific list of tax alternatives. But most Importantly, the average of the
states' ranking may not reflect any Individual state's evaluation. The rankings provided
by the states might be quite different, in many cases, depending on which agency, or
. . . .. ... . . ..
wn~cn unit wlnun an agency prepared tne responses. Also, the responses of individual
states to this question frequently were far different from He average responses. We
would also expect states' relative assessment of the tradeoffs among the various criteria
for actual tax options to be quite different from our qualitative assessment of generic tax
ophom.
On the other hand, we do not advise that the overall assessment of the results of an
evaluation of the alternatives be reduced to a simple ranking (such as the type shown in
Cambridge Systematics, Inc.
81
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Alternative Approaches to Heady Vehicle Taxation
Applications Manual - Summary Evaluation
Exhibit 7.2) and an unweighted sum of the rankings Men be used to select the '`best" tax
system. Most states wiU probably want to give greater weight to some criteria than to
others, and these weighhngs should be given consiclerable attention if an overall
weighted ranking is desired.
We also recommend that states give serious consideration to tradeoffs among the criteria.
This can be done by addressing questions such as: how can the ranking of a tax
alternative for evasion and avoidance be improved, and at what cost? Can costs
(a~ninistrative efficiency) be reduced for an alternative without substantially increasing
evasion? Can me feasibility of an otherwise good alternative be unproved through an
eclucation effort or further study of specific problems raised by interested groups? A
graphic evaluation of tradeoffs among enforcement effort, administrative costs,
compliance costs, and evasion is presented in Section 6.5.
Finally, the relative assessment of alternative tax options may change over time as
technology unproves and as future research provides additional information to aid in
implementing more equitable and more efficient tax systems.
82
Cambridge Systemabcs, Inc.
OCR for page 83
Representative terms from entire chapter:
summary evaluation
