Opinion: Time Is Right to Repeal Federal Excise Tax

This Opinion appears in the June 19 print edition of Transport Topics. Click here to subscribe today.

Tax reform and spurring economic growth are at the top of the agenda on Capitol Hill. But when it comes to a harmful tax in the commercial truck retail market, there is none greater than the federal excise tax. This year, with the political climate ripe for tax reform and an infrastructure bill, American Truck Dealers, a division of National Automobile Dealers Association, is aggressively pursuing a measure to repeal the FET that is advancing on Capitol Hill.

Parker

The FET and NADA turned 100 years old this year. The FET originally was imposed in 1917 to help defray the cost of World War I. This tax on most new heavy-duty trucks, tractors and trailers has grown from 3%, when it was incorporated into the Highway Trust Fund in 1955, to 12% today. The problem is the tax has remained at 12% and is the highest excise tax Congress levies on a percentage basis. The FET routinely adds $12,000 to $22,000 on the price of a new heavy-duty truck, a difficult cost for truck purchasers nationwide. In the past, policymakers have offered proposals to further increase the FET. As truck dealers know, an increase in the FET would severely depress new heavy-duty truck sales and delay the deployment of cleaner, safer and more fuel-efficient trucks.

This outdated tax also is essentially a tax on American jobs. Unlike light-duty vehicles, all heavy-duty trucks sold in the United States in 2016 were manufactured and assembled in North America. The FET hurts truck sales and inhibits job growth, directly affecting the 7.3 million Americans employed in the U.S. trucking industry. Additionally, the FET is a difficult and unclear tax to administer, and truck dealers spend considerable resources attempting to comply with complex IRS regulations associated with collecting the tax.

Last Congress, ATD supported H.R. 33, introduced by Reps. Reid Ribble (R-Wis.) and Tim Walz (D-Minn.), and S.R. 40, introduced by Sen. Cory Gardner (R-Colo.). Both concurrent resolutions put Congress on record as opposed to an increase in the FET.

This year, ATD has decided to support new legislation to eliminate the FET altogether. Rep. Doug LaMalfa (R-Calif.), a member of the House Transportation and Infrastructure Committee and a commercial driver license holder who has purchased and operated a heavy-duty truck, has indicated that he will introduce an FET repeal bill in June.

On June 21-22, ATD will hold its Legislative Fly-In to garner support for this new legislation. Truck dealers across the nation are taking time away from their businesses to visit Capitol Hill to advocate for repeal of this tax. Forty-three truck dealers, including the ATD board, will hold meetings with more than 100 House and Senate members. One hundred years of this onerous and outdated tax is long enough.

This is not the first time Congress has considered eliminating this tax. In 1975, the Senate passed a repeal of the FET as part of a large tax-cut bill. The repeal of the FET was passed by a Democratic-led Senate to spur economic growth. Unfortunately, the FET repeal provision was removed from the final tax bill when the House and Senate worked out their differences between their separate bills.

It’s time again for Congress to take a hard look at the FET and determine if this tax has outlived its usefulness. With tax- reform legislation under consideration for the first time since 1986, this is a great opportunity to educate elected officials on how the FET negatively affects safety, the environment and the trucking industry overall. Congress also needs to consider a new factor that policymakers didn’t have to contend with in 1917, 1955 and 1975: nearly $40,000 in increased regulatory costs added to a new truck due to new and recent federal emissions and fuel-economy mandates.

The federal government is adding a $40,000 cost to new heavy-duty trucks, and then levying a tax on the increased cost it created. This “insult to injury” will make it harder for small businesses to afford a new heavy-duty truck, which is a result no one wants. If our customers cannot purchase new trucks because of excessive taxes or burdensome regulations, the environmental and safety benefits of these new trucks will be nonexistent because our customers will simply keep their old trucks longer.

It’s time for the entire trucking industry — including truck manufacturers — to tell Washington that change is needed. The FET may have been a great idea 100 years ago, but this tax, coupled with new crushing federal regula- tions, hampers growth in the trucking industry and the American economy.

Parker is chairman of ATD, which represents 1,800 heavy- and medium-duty truck dealerships. He is president of Baltimore Potomac Truck Centers in Linthicum, Md., which operates five full-service commercial truck dealership locations with Mack, Volvo and Hino Trucks franchises in Maryland and Virginia.