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August 1, 2019 9:45 AM, EDT

Trucking Stakeholders Ask Congress to Repeal the 12% Federal Excise Tax on Trucks, Trailers

Truck on highway Trucking industry stakeholders say the 12% federal excise tax discourages heavy-duty truck owners from buying new trucks that are equipped with better technology and safety features. (Getty Images)

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A group of trucking stakeholders asked Congress to repeal the 12% federal excise tax on the purchase of heavy-duty trucks, tractors and trailers.

In a letter to top leaders in the U.S. Senate and House of Representatives, 21 wide-ranging trade organizations, including American Trucking Associations, called the tax “outdated” and the “most inconsistent revenue source for the Highway Trust Fund over the past 20 years.”

“Repealing the tax would deploy new, cleaner and safer heavy-duty trucks and trailers by making them more affordable — particularly for small businesses,” read the letter, dated July 24.

Most heavy-duty truck owners can’t afford a $20,000 tax bill per new truck, so they don’t buy them.

Rep. Doug LaMalfa (R-Calif.)

The bipartisan legislation seeking to repeal the excise tax, the Modern, Clean, and Safe Trucks Act of 2019, was introduced in April.

“Most heavy-duty truck owners can’t afford a $20,000 tax bill per new truck, so they don’t buy them,” said Rep. Doug LaMalfa (R-Calif.), one of the sponsors of the bill. “They’re far more likely to purchase used or older trucks with older technology that are not as fuel efficient or don’t achieve the air quality goals the government demands.”

Other groups signing the letter: National Tank Truck Carriers, National Trailer Dealers Association, American Truck Dealers, National Private Truck Council, Truck and Engine Manufacturers Association, and the Truck Renting and Leasing Association.

The tax was first imposed in 1917 to help fund World War I, the letter said, but has since become the highest excise tax on a percentage basis levied by the federal government.

“The FET has risen 300% since then and now increases the cost of new heavy-duty trucks and trailers by $22,000 on average,” the letter said. “This tax, coupled with an estimated $40,000 in new federal environmental and safety mandates per vehicle, discourages the purchase of new, cleaner and safer heavy-duty trucks and trailers.”

Trucking over the past decade has developed sophisticated new technologies to keep drivers and other road-users safe, the letter said. “New truck buyers can choose from an array of high-tech safety technologies, such as automatic emergency braking, adaptive cruise control with braking, lane departure warning and lane-keeping assist, forward collision mitigation, blind spot warning, traction control, tire-pressure monitoring and automatic tire inflation, automatic wipers and headlamps, and side airbags for rollover.

“While new commercial trucks are the safest they have ever been, these new safety systems are expensive. And the 12% federal excise tax, levied on certain trucks and trailers at the point of sale, is a major disincentive for new truck buyers looking to adopt these advanced safety technologies.”

Darrin Roth, vice president of highway policy for ATA, said excise tax revenues are highly variable because they are tied to truck and trailer sales, which can be high in a good economy and low in a recession year.

Darrin Roth, vice president of highway policy for ATA

Roth

“For example in 2008 at the height of the recession, excise taxes brought in about $1.5 billion,” he said. “In 2015, when the economy was doing well, it brought in $4.6 billion.”

Roth added that the Congressional Budget Office has done a 10-year projection of revenue of $5 billion a year. “So you’d need $5 billion a year to replace that revenue.”

Where would a replacement revenue source come from?

“If you were to do it with a diesel tax only, you’d have to raise the diesel tax by about 10 cents a gallon. If you did it for all fuels — gas, diesel and natural gas — it’s about 3 cents a gallon,” Roth said.

Gasoline and diesel taxes are 18.4 cents and 24.4 cents per gallon, respectively.

Other possibilities might be increasing registration fees or other truck taxes, he said.