Truck freight movement gets a subsidy of between $57 and $128 billion annually in the form of uncompensated social costs, over and above what trucks pay in taxes, according to the Congressional Budget Office.
If trucking companies paid the full costs associated with moving truck freight, we’d have less road damage and congestion, fewer crashes, and more funding to pay for the transportation system.
What with all the speculation about a possible trillion dollar spending package for infrastructure, we’ve been hearing a lot about about crumbling bridges, structurally deficient roads, and the need for more highway capacity.
It’s clear that our transportation finance system is broken. To make up the deficit, politicians frequently call for increased user fees – through increased taxes on gasoline, vehicle miles traveled, or even bikes. All the while, one of the biggest users of the transportation network – the trucking industry – has been rolling down the highway fueled by billions in federal subsidies.
A 2015 report from the Congressional Budget Office estimates that truck freight causes more than $58 to $129 billion annually in damages and social costs in the form of wear and tear on the roads, crashes, congestion and pollution – an amount well above and beyond what trucking companies currently pay in taxes.
CBO doesn’t report that headline number, instead computing that the external social costs of truck freight on a “cents per ton mile basis” range between 2.62 and 5.86 cents per ton mile. For the average heavy truck, they estimate that the cost works out to about 21 to 46 cents per mile travelled.
Unfortunately, trucking companies don’t pay these costs. They are passed along to the rest of us in the form of damaged roads, crash costs, increased congestion and air pollution. Because they don’t pay the costs of these negative externalities, the firms that send goods by truck don’t have to consider them when deciding how and where to ship goods. This translates into a huge subsidy for the trucking industry of of between 21 and 46 cents per mile.
For comparison, CBO looked at the social costs associated with moving freight by rail. Railroads have much lower social costs, for two reasons: first, rail transport is much more energy efficient and less polluting per ton mile of travel; second, because railroads are built and maintained by their private owners, most of the cost of wear and tear is borne by private users, not the public. Railroad freight does produce social costs associated with pollution and crashes, but the social costs of moving freight by rail are about one-seventh that for truck movements: about 0.5 to 0.8 cents per ton mile, compared to 2.52 to 5.86 per ton mile for trucks.
There’s a clear lesson here: It may seem like we have a shortage of infrastructure, or lack the funding to pay for the transportation system, but the fact that truck freight is so heavily subsidized means that there’s a lot more demand (and congestion) on the the roads that there would be if trucks actually paid their way. On top of that, there’d be a lot more money to cover the cost of the system we already have.
So the next time someone laments the sad state of the road system, or wonders why we can’t afford more investment, you might want to point out some 18-wheelers who are now getting a one heck of a free ride, at everyone’s expense.
View the full report: “Pricing Freight Transport to Account for External Costs: Working Paper 2015-03“