Misinformation and Arkansas fuel taxes
Editor’s note: Shannon Newton is president of the Arkansas Trucking Association. Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.
The Arkansas legislature recently passed a five-year highway funding program. Pre and post session, quite a bit of information – often in the form of misinformation – appeared in the media.
The solution, while successful in the short term, doesn’t address our state’s long-term highway funding needs. Challenging and complex funding issues remain, issues that directly relate to our future economic vitality and quality of life. As we move forward, it is imperative that both our state legislators and the general public have access to facts that serve as the basis for the objective analysis and careful consideration required.
And therein lies the problem. One of the greatest obstacles to having a policy debate about our highway funding needs is the abundance of misinformation. Far too often this misinformation, widely distributed through media channels, comes at the expense of the truth and perpetuates misunderstanding about highway funding and the supporting tax structure.
In the interest of keeping facts at the center of the debate and, more specifically, in regard to setting the record straight, I felt compelled to write this piece in response to two recent articles and a seemingly innocuous graphic appearing in major local news outlets including the Arkansas Democrat-Gazette and Arkansas Business. While both articles did make some valid points about a map of Arkansas’s neighboring states and comparative fuel tax rates, both drew false conclusions relative to the potential impact of the tax rates based on incomplete data.
Arkansas funds its state and local roads primarily with revenue from state and federal fuel taxes, which are assessed at a fixed rate per gallon of fuel. Fixed-rate fuel taxes tie highway funding revenue to the level of fuel consumption. Granted, a fuel tax isn’t the kind of sexy topic that keeps most readers interested in the fine print, but it’s the fine print where the truth is often found and when the media misinterprets and thereby misinforms readers about how those fuel taxes actually work, the record must be set straight.
True: Arkansas’s fuel taxes are higher than neighboring states.
True: Arkansas has historically spent zero dollars of general revenue on highways.
True: All of our neighboring states have some form of general revenue dedicated to highways.
While the graphics (used by media that show higher fuel tax rates in Arkansas) may dissuade viewers from raising fuel taxes, I contend that is an uninformed conclusion. If one were to draw that conclusion, then they should also equally infer that Arkansas should be spending some portion of general revenue on highways since all of our neighboring states do.
At this time, I’m not advocating for or against, just stating that the media should equally imply so if they also compare state fuel tax rates.
Both articles published recently mention the likelihood of commercial truck drivers opting to fuel in or outside of Arkansas, as though that has any relevance in the tax receipts of the state of Arkansas from the trucking industry. Not only is that claim 100% emphatically not true, but it has major implications in propagating misinformation and confusion among the citizens of Arkansas, its business-leaders and policymakers.
The jurisdiction of the pump used to fuel a commercial vehicle engaged in interstate commerce bears little to no value whatsoever in the state’s collection of fuel tax. Commercial drivers fuel in one of two places: 1) where their employer instructs them to, based on negotiated pricing and volume discounts, or 2) where the driver chooses, based on personal preference and driver amenities like good food, clean showers or available parking.
Every motor carrier engaged in interstate commerce pays fuel tax to the states in which it operates or drives, not where they opt to fuel their trucks.
Trucking companies crossing state lines are required to register as a user of the International Fuel Tax Agreement (IFTA). IFTA is an agreement between the lower 48 states of the United States and the Canadian provinces, to simplify the reporting of fuel use by motor carriers and to ensure proper distribution of tax revenue of entities that operate in more than one jurisdiction.
At the end of each fiscal quarter, trucking companies are all required to file a quarterly fuel tax report. This report lists all miles traveled in various jurisdictions and all gallons of fuel purchased in the same. IFTA offices in each state oversee the quarterly reconciliations, calculating any amount of fuel taxes due to/from the licensee or other jurisdictions. Funds are transferred between the states accordingly. All reporting is subject to audit by the state.
Though this system may seem overly complicated it was actually created out of necessity. Prior to IFTA, each state had its own fuel tax system, and a truck needed tax permits for each state in which it operated. Most states established Ports of Entry to issue permits and enforce tax collection, which was burdensome and inefficient to the trucking industry and the states.
As we continue to evaluate options for solving the state’s needs for funding our roads and bridges, let’s all commit to being more knowledgeable about the tax structure in place.
The trucking industry will continue to fuel at truck stops that offer competitive pricing, safe and pleasant environments for our drivers, and are conveniently located along routes that service our customers. And we’ll also continue to pay fuel taxes proportionately to the states in which we operate, including Arkansas, regardless of the state’s diesel tax ranking 16th or 36th.