Connecticut’s highway use tax (HUT) on trucks traveling throughout the state is off to a slow start, according to figures from the Department of Revenue Service.
The tax, which is based on the weight of the truck and the miles it travels throughout the state, began in January of 2023 and was expected to bring in $45 million in revenue to the Special Transportation Fund (STF) over the course of fiscal year 2023, according to consensus revenue estimates from January. That figure was adjusted downward to $35 million in the May consensus revenue estimates.
Thus far, however, the tax has brought in only $18.6 million for the months of January through April, according to the Department of Revenue Services, a little more than half of what analysts expected.
The HUT has averaged roughly $4.6 million per month during its first four months of collection, and with only May and June figures remaining for fiscal year 2023, the HUT is on track to bring in roughly $28 million over the course of six months — $17 million below initial expectations and $7 million, or 20 percent, below May’s revised expectations.
Although the latest revenue estimates adjusted the HUT revenue figure downward, analysts maintained the previous out-year revenue estimates, predicting the truck tax will bring in $90 million in fiscal year 2024, growing to $98 million by 2026.
Although the HUT estimates only pertain to half of fiscal year 2023, if the average revenue collection continues, it would only bring in $55.2 million over a full year, 39 percent less than anticipated.
The HUT was passed by the General Assembly in 2021, largely along party lines. Gov. Ned Lamont wanted the truck tax – which is called a “fee” on state websites, but a “tax” on data portals – to help bring in revenue to the STF for highway and bridge maintenance.
Gov. Ned Lamont and Democrats in the General Assembly argued large trucks did more damage to roads due to their weight and out of state trucks were essentially getting a free ride on Connecticut highways, although all trucks passing through Connecticut already paid fuel and registration taxes, regardless of whether they purchase fuel in the state.
Republicans and the trucking industry opposed the measure, arguing it would increase costs for trucking companies who will then pass on those costs to consumers in the form of higher costs for goods, most of which are brought into the state via trucks.
The trucking industry, which opposes HUT, has argued that similar taxes in other states like New York are notoriously difficult to collect with high evasion rates. Connecticut’s tax essentially operates on the honor system, meaning that in-state trucking companies are more likely to pay the tax while out of state companies may be more prone to ignore it.
Republicans in the legislature have made repeated attempts to repeal, or at least suspend, the HUT, including using a parliamentary procedure to force a public hearing on repealing the tax during the 2023 legislative session, which saw hundreds testify but did not receive a vote by the Transportation Committee.
John Blair, president of the Motor Transport Association of Connecticut (MTAC), argued that 21 states have repealed similar highway use taxes, the tax has a high rate of evasion, and Connecticut no longer needs the money following an influx of federal COVID dollars and projected budget surpluses over the next four years.
Herbert Holden, Jr. vice president of Herb Holden Trucking of East Windsor testified the HUT will cost his company, which consists of 18 trucks, between $65,000 and $70,000 this year, the equivalent of hiring another truck driver.
However, Lamont’s budget chief, Jeffrey Beckham, argued in testimony that doing away with the HUT will leave the STF in a deficit starting in 2025.
“The loss of this revenue would not just put the Special Transportation Fund in deficit, it would also jeopardize the state’s ability to provide valuable investments to address congestion and maintenance throughout the state’s transportation network,” Beckham said in written testimony.
Although the bill to repeal the HUT had little chance of passing, a slight modification to the tax was made as part of the budget bill recently passed by the General Assembly and signed by Lamont.
Under the change, trucking companies will only have to submit HUT payments quarterly rather than monthly, beginning in the fourth quarter of 2023.
The final revenue figures for fiscal year 2023’s HUT collections will not be available until the end of July.
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Furthermore, the lack of outreach and communication from the state about the truck tax caught many truck owners off guard. It seemed as though the state was not fully prepared for the influx of truck owners seeking to comply with the new tax law. This led to a sense of frustration and mistrust among truck owners who felt blindsided by the sudden implementation without proper guidance.
While I understand the importance of generating revenue for the state, the slow start of the truck tax implementation has left many truck owners like myself feeling disheartened and dissatisfied with the process. I hope that the state takes the feedback from truck owners into consideration and improves the system to make it more efficient and user-friendly in the future.
In conclusion, my personal experience with Connecticut’s truck tax has been disappointing due to the slow start and lack of clarity in the implementation process. I believe that with proper adjustments and better communication, the state can successfully implement the truck tax and utilize the revenue to benefit the transportation infrastructure in Connecticut.