By Mike Kastner, NTEA Managing Director
This article was published in the March 2018 edition of NTEA News
It’s a definite maybe.
The debate over how best to fund the nation’s infrastructure needs may provide the best opportunity to repeal the 12 percent Federal Excise Tax (FET) on the retail sale of certain heavy trucks, tractors and trailers.
Repealing one of the revenue sources — albeit a relatively minor one — for the Highway Trust Fund (HTF) may seem illogical given the need for additional infrastructure funding. When taken in context, however, FET repeal makes sense.
The current FET is a bad source of revenue from a funding perspective. It’s complicated to administer and subject to inadvertent evasion, and its annual HTF contribution can vary widely due to sales fluctuations causing difficulties in long-term budgeting. In addition, it makes purchasing newer, safer and often domestically produced trucks more difficult for consumers to afford.
Since funding mechanisms for the nation’s transportation infrastructure have not been reviewed in years, HTF is constantly on the verge of insolvency. As a result, major repairs and necessary new road construction have been delayed to a critical point. New funding will be required to fix infrastructure problems. For instance, the biggest HTF contributors are gas and diesel taxes — which were never indexed to inflation and have not been raised since 1993. Inflation has jumped by more than 70 percent, and cars and trucks have seen dramatic increases in fuel efficiency since that time — which further erodes the buying power of HTF. All this means significant reform to the funding mechanisms is necessary.
If federal transportation funding needs major reform, it makes sense in so doing to eliminate the most complex and least reliable revenue source: the FET on trucks, tractors and trailers.
President Trump has called for Congress to pass a $1.5 trillion infrastructure. While short on specifics, in his State of the Union address, he noted, “Every federal dollar should be leveraged by partnering with state and local governments and, where appropriate, tapping into private-sector investment to permanently fix the infrastructure deficit.”
While private/public partnerships may be a possible source of funding for new construction, a stable revenue stream is still needed to maintain and repair our roads and bridges. This is why current revenue streams must be reviewed and reformed, including elimination of FET.
Repeal legislation
Rep. Doug LaMalfa introduced H.R. 2946 — the Heavy Truck, Tractor, and Trailer Retail Federal Excise Tax Repeal Act of 2017 — which has double-digit bipartisan co-sponsors. This legislation, as the title implies, would repeal FET. It includes a number of reasons why the tax should be eliminated. Our hope is to get the language of this bill included in a larger transportation infrastructure reform package.
H.R. 2946 explains:
- The federal government levies a 12-percent retail excise tax on certain new heavy trucks, tractors, and trailers;
- The tax discourages the replacement of older, less environmentally clean and less fuel economical vehicles;
- This 12-percent federal retail excise tax is the highest percentage rate of any federal ad valorem excise tax, routinely adding between $12,000 and $22,000 to the cost of a heavy truck, tractor or trailer, but it could be much more based on the vehicle’s final price;
- This FET was first levied by Congress in 1917 to help finance America’s involvement in World War I;
- The average in-use, heavy truck is about 10 years old. Environmental Protection Agency (EPA) model year 2002–2010 tailpipe emissions rules account for $20,000 of the average price of today’s new heavy-duty trucks. The 2014 EPA regulations add an average of $6,683 to each heavy-duty truck, and EPA’s Phase Two rules will add another $12,500 to the price of new heavy-duty trucks;
- The $39,183 average per-truck cost of these regulatory mandates results in an additional $4,700 FET, on average.
As FET on certain new heavy trucks, tractors and trailers is based on annual sales, receipts from the tax deposited in HTF can vary greatly year-to-year. Congress should consider a more reliable and consistent revenue mechanism to protect HTF.
Please ask your senators and representatives to support repeal of the 12 percent FET on heavy trucks and replace the funds via overall HTF reform.
How to contact your legislators
Visit congress.gov, go to the Contact Your Member section and choose Representatives or Senators. Locate your senator or representative in the alphabetical list or use zip code lookup if you don’t know your legislators.
When contacting your legislators, use a specific bill number, such as H.R. 2946, if you have it. If not, mention the subject matter, state whether or not you support it and then briefly explain your reasons.
Visit ntea.com/advocacy for the latest legislative and regulatory news.