By Mike Kastner, NTEA Managing Director
This article was published in the March 2019 edition of NTEA News.
NTEA is pleased to be a founding member of a new industry group leading the charge to repeal the 12 percent Federal Excise Tax (FET) on heavy-duty trucks. The new coalition, Modernize the Truck Fleet (MTF), includes NTEA, American Truck Dealers, Truck Renting and Leasing Association, and Truck and Engine Manufacturers Association. Moving forward, we hope to attract a broad sector of support from equipment manufacturers, truck users and other trade groups.
MTF is working to repeal the 102-year-old FET levied on heavy-duty trucks originally imposed to help defray the cost of World War I. The expense added by FET discourages new heavy-duty truck sales and delays deployment of cleaner, safer and more fuel-efficient trucks.
FET revenues, along with fuel and other taxes, are deposited into Highway Trust Fund (HTF) to build and maintain roads and bridges. While NTEA backs the need to generate revenue for HTF, there should be a simpler, more stable and more equitable manner to do so.
FET is a flawed way to underwrite the nation’s infrastructure. As the tax is based on sales, it’s inherently unstable. Over the last 10 years, revenues fluctuated by almost 50 percent, making long-term expenditure planning difficult.
Collection of FET is problematic, as anyone faced with collecting it knows. Administrative rules are often complex and confusing. Determining which chassis, bodies and equipment are or are not taxable can become a significant source of disagreement in an audit — the consequences of which can be severe.
FET is not fair. The premise on which road taxes are based is that of a user fee — the more a vehicle uses the road, the more it pays. A heavier vehicle traveling more miles puts greater stress on roads and bridges than a lighter one traveling fewer miles. FET is based on sales price, not road usage. As is common in the work truck industry, there could be a truck subject to FET that has an expensive combination of body and equipment, thus paying a significant amount of tax but perhaps only driving a few miles per day to a jobsite. A tractor-trailer, likely paying less in FET based on purchase price, may travel 50,000 miles or more in a year.
“Working to repeal the FET and stabilize Highway Trust Fund revenues will serve the needs of the nation’s economy and speed the integration of the latest safety and emissions technologies into the truck fleet,” said Steve Carey, NTEA president & CEO.
Since HTF funding mechanisms have not been reviewed in years, it’s constantly on the verge of insolvency. As a result, major repairs and necessary new road construction have been delayed to a critical point. Both parties in Congress and the White House have indicated an interest in working together to resolve this issue.
New funding will be required to fix infrastructure problems. For instance, the biggest contributor to HTF is the gas and diesel tax. Such taxes were never indexed to inflation and have not been raised since 1993. Inflation increased by more than 70 percent since then. Additionally, cars and trucks have seen dramatic increases in fuel efficiency, further eroding HTF buying power. This means significant reform to funding mechanisms must occur.
If federal transportation funding needs reform, it would make sense to eliminate the most complex and least reliable revenue source — FET on trucks, tractors and trailers.
Last year, Representative Doug LaMalfa of California introduced H.R. 2946 to repeal FET. He sent a Dear Colleague letter, which included NTEA’s logo as a supporter of the bill, to each member of Congress, asking for support.
In his letter and the legislation, Rep. LaMalfa points out FET significantly increases the cost (by 12 percent) of new heavy-duty trucks, truck bodies and trailers, discouraging replacement of older and less fuel-efficient vehicles. These older vehicles are less environmentally friendly and lack the most recent safety advancements.
By the end of the last Congress, this legislation had 26 cosponsors. Now that a new Congress has been sworn in, we have begun work on securing new legislation. NTEA will keep you apprised when a new bill becomes available.
For more legislative and regulatory information, visit ntea.com/advocacy.