Repealing Truck Tax: A Proposal by Truckers and Lawmakers to Achieve Emission Goals
A Century-Old Tax Discourages New Truck Buyers Despite Emission Standards.
The United States government has proposed a new vehicle emissions rule to promote the production of clean cars and trucks. However, a tax on new heavy-duty trucks that has been in place for over a century could hinder the trucking industry’s ability to meet climate goals.
Many individuals in the trucking industry have been advocating for the removal of the 12% federal excise tax on the first sale of a heavy truck used on a highway, which can increase the cost of a high-end rig by up to $30,000. The industry is optimistic that legislators will show more interest in their cause as Democrats in Congress and President Joe Biden work towards expanding the country’s fleet of clean vehicles in an affordable and equitable manner.
Andrew Boyle, vice chair of the American Trucking Associations, an industry organization, stated that “Eliminating the tax will reduce the cost of new technologies by tens of thousands of dollars and is a technology-neutral solution that allows companies to invest in not only battery-electric, but alternative fuel vehicles as well depending on the availability of infrastructure to support the specific technologies,” during a Senate hearing last week.
Although the tax is placed on the seller, dealers include the tax in the price tag of a new truck. Additionally, the cost of new safety and emission-reducing equipment is expected to raise the price of new big-rigs, which the federal excise tax will only worsen.
Several weeks after the American Trucking Association, the American Truck Dealers, and Zero Emission Transportation Association sent a letter to congressional leaders requesting that they reconsider the tax, Rep. Doug LaMalfa, R-Calif., reintroduced a bill, alongside Rep. Chris Pappas, D-N.H., to abolish the truck excise tax.
“The FET is the highest percentage excise tax on anything in this country,” LaMalfa stated in a March floor speech. “It disincentivizes truckers and trucking companies from purchasing new, up-to-date rigs. … Repealing this tax would make it easier to ship goods across the country at lower prices for consumers, saving businesses and consumers money.”
Sen. Todd Young, R-Ind., and Sen. Benjamin L. Cardin, D-Md., introduced the companion bill (S 694).
The Evolution of the Federal Excise Tax on Trucks: From War Fund to Highway Trust Fund Supplement
The federal excise tax on trucks was enacted in 1917 to help fund World War I, and subsequently the Great Depression, World War II, and the Korean War. It is now used to make up for declining Highway Trust Fund revenues as the federal government looks for funding mechanisms other than the gas tax.
According to a 2021 Congressional Budget Office testimony before the Senate Finance Committee, the truck and trailer excise tax contributed 12% of the Highway Trust Fund revenues in 2019, or approximately $5 billion. The excise tax on various fuels, which traditionally fed the fund, brought in about $36 billion, but Congress still had to transfer $118 billion to the fund under the 2021 infrastructure law (PL 117-169) to stabilize the account through 2026.
Trucking Organizations Express Concerns Over Repeal of Truck Tax Benefiting Larger Carriers Over Smaller Ones
A spokesperson for the Owner-Operator Independent Drivers Association, a trucking organization that advocates for small-business truckers, explained that the repealed excise tax would primarily benefit large carriers in purchasing new trucks, while smaller carriers would likely still struggle to afford new rigs.
Without the excise tax to make up for the fund’s deficit, small trucking businesses are concerned that they will be forced to pay more taxes while larger carriers replace their fleets with new trucks, placing them at a disadvantage.
Bill Sullivan, ATA’s executive vice president for advocacy, argued that the extra funding for the Highway Trust Fund provided by the infrastructure law has made the account “safe” for the time being, but it is clear that further government action is necessary to replace.
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