New coalition seeks repeal of federal excise tax on heavy trucks and trailers

New truck and trailer purchases currently include a 12 percent federal excise tax, adding tens of thousands of dollars to the purchase price. A new coalition is looking to lobby for the repeal of the tax.

Efforts to repeal the federal excise tax (FET) on heavy trucks and trailers have resulted in no action to date from Congress. On Friday, the American Truck Dealers (ATD) announced the formation of a new coalition to achieve this goal.

“Repealing this 102-year-old tax remains our number 1 priority,” Jodie Teuton, ATD chairwoman and vice president of Kenworth of Louisiana and Hino of Baton Rouge, Louisiana, announced during her keynote address at the American Truck Dealers Show in San Francisco. “This tax discourages the deployment of today’s cleaner, safer and more fuel-efficient heavy-duty trucks. And this year, we won’t be alone in the fight. We now have some strong industry allies.”

Members of the new coalition, called Modernize the Truck Fleet, are the Truck and Engine Manufacturers Association (EMA), whose members include Daimler Trucks North America (OTC: DMLRY), Navistar (NYSE: NAV), PACCAR (NASDAQ: PCAR), Volvo Group North America (OTC: VLVLY) and Cummins (NYSE: CMI); NTEA – The Association for the Work Truck Industry; and the Truck Renting & Leasing Association (TRALA).

The goal is to get the 12 percent excise tax repealed. Last summer, U.S. Senator Cory Gardner (R-CO) introduced S. 3052, legislation that would repeal the tax. It is similar to H.R. 2946, the “Heavy Truck, Tractor and Trailer Retail Federal Excise Tax Repeal Act” introduced in the House of Representatives by U.S. Representative Doug LaMalfa (R-CA) in June 2017. The House bill currently has 17 bipartisan cosponsors.

The bills would amend the Internal Revenue Code of 1986 and remove the tax, which is among the highest excise taxes for any industry, said Gardner.

“This burdensome tax creates excessive costs that are passed on to truckers, who play an essential role in maintaining our nation’s economy,” said Gardner at the time. “I was happy to introduce legislation to repeal it.”

The FET applies the tax on gross vehicle weight (GVW) vehicles above 33,000 pounds, trailers above 26,000 pounds, and tractors above 19,500 pounds, on their first sale. First introduced in 1917 to help pay for World War I, the tax has grown from three percent to its current 12 percent, meaning up to $20,000 or more could be added to the price of a new vehicle.

“The truck industry is united, and we have two goals: repeal the FET and find an acceptable replacement for the lost revenue from the FET that provides a long-term solution to help fund our highways and modernize America’s fleets,” Teuton said. “We’re joining our efforts this year to include the FET repeal in a comprehensive infrastructure bill.”

“The FET increases the cost of purchasing new, modern heavy-duty trucks, and as such we endorse repealing the FET to lower barriers to deploying the cleanest and safest trucks available. We are enthused to help lead this important effort to modernize the truck fleet,” Jed Mandel, president of EMA, said.

Modernize the Truck Fleet coalition members will also work to develop an alternative funding option to replace the tax and provide sustainable highway funding.

“Working to repeal the FET and stabilize the 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,” Steve Carey, president and CEO of NTEA, said.

Jack Jacoby, president/CEO of TRALA, noted the historic opportunity to remove the tax through an infrastructure bill in 2019, and ensure modern trucks and trailers are deployed in fleets.

“TRALA is excited to be part of the Modernize the Truck Fleet coalition, Jacoby said. “With an infrastructure bill as likely to pass as any piece of legislation in 2019, this is the time to put all of our combined energy into finding a way to replace the onerous FET,” he said. “We are excited to be a part of such a collaborative effort working with truck companies, manufacturers, dealers and end users who all want to put the cleanest, most technologically advanced trucks onto our highways immediately.”

“This Congress, we have a unique opportunity to make FET repeal a reality,” Teuton added. “Both Congress and the administration are discussing a comprehensive infrastructure bill that would address funding. This is our best shot in decades to eliminate this tax.”