NTEA Managing Director
This article was published in the August 2022 edition of NTEA News.
United States Representatives Chris Pappas (D-NH) and Doug LaMalfa (R-CA) introduced legislation in the U.S. House to repeal the Federal Excise Tax (FET) on heavy trucks. The bill number is H.R. 8116, and this legislation joins bipartisan Senate bill S. 2435, which was previously introduced by Senators Todd Young (R-IN) and Ben Cardin (D-MD).
Problems with FET
NTEA member companies are well aware of administrative burdens and economic issues associated with FET. It adds significant cost to the purchase of a new truck and can be overly complex to calculate. In fact, NTEA publishes a 165-page Federal Excise Tax Guide for the Work Truck Industry. No industry-specific tax should be so complicated to require such a lengthy compliance guide.
From the government’s perspective, collecting and auditing FET is expensive in relation to revenues. Perhaps even more concerning is that being based on retail sales, FET is an unstable source of annual revenue.
Modern heavy-duty trucks and trailers are cleaner and more fuel-efficient than ever. Although medium- and heavy-duty trucks account for only 4% of all vehicles on the road, they haul 70% of domestic freight, consume over 22 billion gallons of diesel, and travel over 200 billion miles per year. This activity means small improvements to a truck fleet can yield large results. Over the past three decades, cleaner fuel and advanced engines have combined to reduce emissions of oxides of nitrogen (NOx) by 97% and particulate matter (PM) emissions by 98%. And trucks manufactured since 2010 have reduced carbon dioxide emissions by 43 million tons, NOx emissions by 21 million tons, and PM emissions by 1.2 million tons. It would take 60 of today’s new trucks to generate the same level of emissions as a single truck manufactured in 1989.
Not only are newer trucks cleaner, they are safer than older vehicles. While the nation’s truck fleet continues to age, new truck buyers can access an array of high-tech safety technologies, such as automatic emergency braking (AEB); adaptive cruise control with braking; lane departure warning and lane-keeping assist (with intervention); forward collision mitigation; blind spot warning; traction control; tire-pressure monitoring and automatic tire inflation; automatic wipers and headlamps; and side airbags for rollover.
The purchase of new, clean and safe trucks should be incentivized and not financially discouraged.
Previous repeal efforts
Lead sponsor of the new House bill, Rep. Chris Pappas, led the effort last summer to institute an FET holiday during the height of the pandemic.
Rep. Pappas coordinated a letter to House Speaker Nancy Pelosi asking that the 12% FET on heavy trucks and trailers be suspended until the end of 2021 as part of the coronavirus stimulus bill being debated at the time. While ultimately unsuccessful, the letter was signed by 55 House Democrats.
Along with the Pappas letter, almost 200 groups signed a coalition letter sent to both House and Senate leadership calling for FET suspension. Additionally, the United Auto Workers (UAW) sent a letter to Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) calling for suspension of FET to help spur truck sales and keep employees working.
In his letter, Rep. Pappas emphasized the affect COVID has had on industry. He pointed out that suspending the 12% FET until the end of 2021 would stimulate sales and protect manufacturing and trucking-related jobs at a critical time.
Rep. LaMalfa was the lead sponsor of repeal legislation in the previous Congress.
Congress passed significant infrastructure spending last year but did not address the precarious funding for such spending.
Roads and bridges have traditionally been funded through highway user-related taxes. Those taxes are deposited into the Highway Trust Fund (HTF) and then used to build and maintain our transportation infrastructure. The largest source of revenue is a federal per gallon tax on gas and diesel. This had always made sense — the bigger the vehicle and the further it drove, the more fuel it used, and thus the more tax it paid into the HTF.
Also contributing to the HTF are taxes on tires for heavy trucks, an annual heavy vehicle use tax and the 12% FET on the sale of heavy-duty trucks, tractors and trailers.
In 2020, all of these taxes contributed $43 billion to the HTF — of that, the tax on gasoline
(18.4 cents per gallon) contributed $26 billion, and diesel (24.4 cents per gallon) added $10.5 billion. Fuel tax rates have remained unchanged since 1993. In those years vehicles have become more fuel-efficient — consuming fewer gallons per mile. Electric vehicles that pay no fuel taxes have begun to take hold, and since the fuel tax rates are not indexed to inflation, the buying power of those taxes has been deteriorating each year.
Since 2008, HTF outlays have exceeded revenues collected. Since the HTF is operating in the red, Congress must transfer general revenues in order to meet our transportation infrastructure spending obligations.
The Congressional Budget Office projects that by 2030, HTF outlays will exceed trust fund reserves by a cumulative $134 billion.
It’s time for Congress to repeal FET
NTEA has long championed FET repeal while recognizing that the lost revenue must be replaced. While seemingly illogical based on the increased need for revenue, now is the best time to consider FET repeal. Eliminating FET must be a cornerstone of the debate for better funding mechanisms.
First imposed in 1917 to help fund World War I, FET is the highest excise tax, on a percentage basis, levied by the federal government. It has increased by 300% since then and now adds an average of $22,000 to the cost of new heavy-duty trucks. 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.
FET contributions to infrastructure funding are outweighed by its negative attributes. It taxes a primarily domestically produced product, its revenues are unstable year-to-year, it is not visible to the public, and it is complex to administer and collect. Additionally, HTF revenues should be based on a user fee concept. The sales price-based tax does not necessarily equate to the vehicle’s road use. For instance, a truck with expensive mounted equipment that drives very few miles per day could pay much more FET than a less expensive truck that drives many more miles per day.
Congress should repeal FET to promote U.S. jobs, replace older trucks with newer, environmentally cleaner vehicles, and promote the adoption of advanced safety technology in trucks.
How can you help?
As an industry, we strongly urge Congress to consider ending the burdensome FET as it debates infrastructure spending and reauthorization of the highway taxes.
Ask your Representative to support the repeal of the 12% FET on heavy-duty trucks. You can contact your Representative and ask that they support H.R. 8116 by entering your zip code at house.gov.
Contact your Senators and ask that they support S. 2435, which would repeal the FET, at senate.gov/senators/contact.
Visit ntea.com/repeal-fet for more information.