A group of transportation and trucking stakeholders calling on Congress to repeal a World War I-era tax on heavy-duty trucks says the measure disproportionately burdens small businesses and dampens demand for electric vehicles (EVs).
In a joint letter to Congress dated Feb. 22, the American Trucking Associations (ATA), the American Truck Dealers (ATD) and the Zero Emission Transportation Association (ZETA), voiced their displeasure with the Federal Excise Tax (FET), a tax on heavy-duty commercial vehicles that was established in 1917 to help cover the costs of World War I.
Calling the tax an “outdated” revenue source, the trucking associations noted that the tax has increased from 3 percent when it was first instituted to 12 percent today, hampering investments in cleaner, safer trucks and equipment.
The coalition argues that adding a 12 percent tariff on the cost of a new truck disincentives trucking fleets small and large from modernizing their equipment and replacing older tractors with new, low-emission power units.
“If Congress is serious about safety, the environment and jobs, then repealing the FET should be front-burner,” said ATA president and CEO Chris Spear in a statement. “It’s time to shelve this World War I-era tax and start putting the best equipment on our roads.”
The tax applies to vehicles with a gross weight of 33,000 pounds, with trailers of 26,000 pounds, or tractors with a gross weight of 19,500 pounds or a gross combined weight of 33,000 pounds.
The duty is applied on the first sale of the heavy-duty truck, truck trailer or semitrailer chassis and body, for which the motor carrier purchaser is responsible—ultimately increasing the cost of goods for trucking companies, brands and consumers across the board.
Although the rising availability of low-emission and zero-emission options should eventually cut the base price for these vehicles, the tax can add more than $50,000 to the cost of the latest low- or zero-emission vehicle, making these investments cost-prohibitive for smaller fleets, the coalition argues. Over 90 percent of U.S. motor carriers operate six or fewer trucks.
“The regressive nature of the FET makes it disproportionately hard for these small businesses, many of which are family-owned and operated, to purchase new equipment,” the letter said. “Larger fleet operators take longer to modernize their vehicles due to price increases from the onerous excise tax.”
The added $50,000 tax burden would amount to more than twice the price of internal combustion engine trucks, according to a study of zero-emission trucks by the International Council on Clean Transportation.
“The federal government wants heavy-duty trucks to be cleaner or emission free, but slaps a 12 percent tax on the newest, greenest trucks,” said Scott McCandless, ATD chairman and president of McCandless Truck Center LLC. “If the goal is to reduce emissions, repealing the counterproductive FET is a good place to start.”
The three parties that joined forces to pen the letter have a major stake in the future of the trucking industry, and are significantly impacted by how the government sets monetary policy related to intermodal transportation.
The ATA is the largest national trade association for the trucking industry, linking 50 affiliated state trucking associations and industry-related conferences and councils.
Meanwhile, the ATD is a division of the National Automobile Dealers Association (NADA) and represents more than 1,800 franchised medium- and heavy-duty truck dealers holding nearly 3,000 separate franchises, across domestic and import. Franchised truck dealers are directly responsible for more than 144,000 U.S. jobs.
ZETA’s role is relevant to today’s move away from fossil fuel dependency, as the federal coalition is focused on advocating for 100 percent EV sales by 2030. The association is committed to enacting policies that drive EV adoption, create hundreds of thousands of jobs, secure American global EV manufacturing leadership, drastically improve public health and significantly reduce carbon pollution.
“The federal excise tax harms American truckers and fleet operators by inflating the cost of heavy-duty trucks and limiting access to the many economic and public health benefits that come with transportation electrification,” said Albert Gore, executive director at ZETA. “Medium and heavy-duty trucks account for 24 percent of all transportation carbon emissions in the United States but represent only 4 percent of vehicles on the road. It is time to accelerate our movement towards modernized transportation fleets, and we must enable our nation’s fleet operators and truckers to join in this effort.”
The organizations aren’t alone in fighting to scrap the FET, with allies in Congress long seeking to repeal the century-old charge.
A bipartisan bill introduced in the U.S. House of Representatives by Reps. Chris Pappas (D-N.H.) and Doug LaMalfa (R-Calif.). last June called the Modern, Clean, and Safe Trucks Act of 2022 would repeal the FET on heavy-duty vehicles. A similar Senate bill was introduced last year by Sen. Todd Young (R-Ind.) and Sen. Ben Cardin (D-Md.). Neither bill has advanced through the legislature.
Various bills to repeal the FET on trucks have been introduced each year since at least 2017.