Delivery fees are a bad way to fund the roads

Yesterday, noting the squeeze on gas tax revenues relative to the construction and maintenance they are required to help cover, I asked how should we pay for the roads?

One answer is a tax on retail deliveries, such as the 50 cent charge on purchases of more than $100 — except for retailers with less than $1,000,000 of retail sales within the state and transactions not subject to sales and use tax except for clothing — which went into operation in Minnesota at the start of this month. Stateline reports that:

For decades, states have relied on gas taxes to provide much of the money to maintain roads and bridges. But as cars become more fuel efficient, and some Americans switch to electric vehicles, state leaders say the gas tax won’t pay the bills for much longer.

At the same time, many cities have seen their streets crowded with delivery trucks from Amazon and other companies, as consumers increasingly opt to have products delivered to their homes. In a few states, lawmakers think fees on those deliveries could be part of their road-funding solution.

If you’re going to be creating wear and tear on our roads, you should help pay to maintain them,” said Colorado state Rep. Cathy Kipp, a Democrat who chairs the Energy and Environment Committee. [Emphasis added]

Rep. Kipp’s sentiment is a sound one. Her policy solution, as in Minnesota, is not.

Ideally, we want to link payment for wear and tear as closely as possible to the amount of wear and tear the payer imposes, so that people who drive more pay more and someone who drives a Ford F-150 should pay less than someone who drives a Ford F-150 Lightning which weighs at least 1,000 pounds more.

A delivery fee fails to do that. It is not linked to the wear and tear the delivery imposes. It is 50 cents whether the truck drives five miles or fifty miles. It fails to link payment for wear and tear all that closely to the amount of wear and tear the payer imposes.

This isn’t the only reason the delivery fee is bad policy. For one thing, the businesses paying this tax — which will simply be passed onto customers at any rate — are already paying tax on the gas they are using so these retail fees are effectively double taxation. For another, Minnesota’s policy is hopelessly complicated.

The search for a better way to pay for the roads goes on.