Distributional Impacts Analysis (4)

Description:

Distributional impacts analysis (also referred to as equity analysis) includes a range of qualitative and quantitative analyses to determine distributional impacts of a RUC. Typical analyses include socioeconomic, geographic, and vehicle type.

Details:

Analyses typically involve answering some or all of the following questions:

  • Income—Does RUC have differential impacts based on household income?
  • Urban versus rural—Does RUC have differential impacts based on urban/rural residency?
  • Are any other demographics in the state substantially impacted by RUC?
  • Does RUC have differential impacts based on vehicle type?
  • Does RUC have differential impacts based on economic sector? Are agriculture, freight, commercial, residential, or other sectors impacted more substantially?

Primary Use:

Discuss and formulate policy.

Best Practices/Lessons Learned:

  • When going into the distributional impacts analysis, it is useful to consider the types of rate structures. For modeling purposes, using a RUC rate that is revenue-neutral with the current gas tax allows for comparisons across revenue mechanisms, independent of the need to increase revenue. Choosing a rate that increases revenue can be considered at the start or later in program development, but that choice should be made openly and in coordination with the legislature. See Rate Calculation building block for details.
  • Because lower income and more rural households tend to have older and less fuel-efficient vehicles, introducing passenger vehicle RUC tends to slightly improve vertical equity as well as rural versus urban equity.
  • If a RUC task force has been established (see Creation and Convening of Task Force building block), members should have a solid understanding of the potential equity implications of a RUC.
  • A separate analysis should be conducted for commercial vehicles, including a review of existing tax/fee exemptions.

State Government Context and Assumptions:

Any major shift in tax/fee policy, such as RUC, invites equity concerns. The economic context will vary by state. State departments of commerce or others may conduct the analyses. Use of a RUC task force to provide input on this can be an effective method for collecting concerns and vetting results.