A bill proposed in the House of Representatives would repeal the retail sales excise tax on heavy trucks and replace the revenue with what is touted by trucking lobbyists as a “small” or “modest” increase in the diesel fuel tax rate of 6.3 cents per gallon. HR 4321 was introduced by Rep. Jim Gerlach (R-PA) and is cosponsored by Rep. Earl Blumenauer (D-OR). The bill has been referred to the House Ways and Means Committee, of which Rep. Gerlach is a Member.
According to the National Truck Equipment Assn. (NTEA), the12% federal excise tax (FET) is currently levied on the retail sale of some heavy truck and truck bodies, trailers and semitrailer bodies and chassis and truck tractors. The revenues collected from this excise tax are dedicated to the highway trust fund, which is used to pay for the construction and maintenance of federal highways and bridges. Fuel taxes are the primary revenue source for this fund.
Both NTEA and the American Trucking Assns. (ATA) have come out in support of this “tax swap” bill. In an emailed newsletter, NTEA contended that the 12% retail sales tax “serves as a disincentive to sales” and pointed out that “as the economy and industry begin to recover, eliminating this disincentive will serve to strengthen the industry.”
“The proposal by Congressmen Gerlach and Blumenauer would not only reinforce the ailing Highway Trust Fund, but would provide a boost to US manufacturing and speed adoption of environmentally friendly technologies,” said ATA president & CEO Gov. Bill Graves. “It is exactly the kind of pro-growth, deficit-trimming legislation that lawmakers should be looking at as they seek to address our nation’s economic woes.”
“Revenues from the excise tax are only paid into the Highway Trust Fund when new trucks are purchased, but when truck sales slump, it puts even more pressure on the already overextended fund,” Graves said. “By collecting more in the diesel tax, the federal government could ensure a more stable and predictable source of funding for needed highway and bridge projects.”
“Further, by cutting more than $15,000 from the cost of the average new truck, eliminating the excise tax will encourage purchases of trucks, providing a boost for manufacturing and accelerate the adoption of new technologies aimed at improving safety and fuel efficiency,” he added. “Legislation like this is a win-win for the government and for the business community and should be swiftly enacted.”
NTEA also argued that since the FET is levied on truck sales and the collected revenue is dedicated to highway funding, it is basically a user fee. “As a user fee, the FET is flawed,” said the association. “It does not equitably tax the users of the highways. The fuel tax more closely approximates user equity. The heavier the vehicle and the more distance it travels the more fuel it typically uses. The more fuel the truck uses, the more it pays into the highway trust fund.”
In addition, NTEA stated that the highway trust fund is shrinking and that the “FET serves as a very unstable source of revenue. FET revenues are completely driven by sales. When truck sales drop, the FET revenue being deposited to help pay for highway construction and maintenance drops in a corresponding manner. Fuel tax revenues are much more resistant to economic ups and downs. The fuel tax provides a significantly more stable source of revenue for federal budgeters.”