The Federal Excise Tax (FET) is one of the oldest taxes in American history. Since it was enacted twenty years ago, it has had a noticeable consequential effect. For example, the trucking industry is finding that upgrading their fleets is incredibly expensive. The Modern Trucking Fleet (MTF) coalition that was established in January 2019, is now taking action to remove this antiquated excise tax that was enacted 102 years ago by Congress to pay for World War I efforts. In a letter to Congress, the MTF wrote: “repealing the tax would deploy new, cleaner, and safer heavy-duty trucks and trailers by making them more affordable—particularly for small businesses,” that is dated July 24.
The money that is collected from this tax is given to the Highway Trust Fund to finance most government spending for highway and mass transit projects. Representative, Doug LaMalfa (R-CA) who is a supporter of repealing the FET is quoted saying, “the FET is also the highest percentage-based tax that Congress imposes on any product, and it’s not even a reliable source of funding for the Highway Trust Fund.”
In an effort to appease Congress, the MTF has been working to find an alternative source for the percentage of tax that supports the Highway Trust Fund in order to alleviate the potential loss. The American Truck Dealers (a division of National Automobile Dealers Association) states that the FET tax has been the most inconsistent source of revenue to the MTF over the past 20 years. They are fighting for the rights of business owners to purchase new trucks because they would improve highway safety and drive economic growth. The advanced safety features would help prevent crashes and protect motorists on the road. It is also evident that the tax itself depresses truck sales and stunts job growth.
“[The tax] is an outdated and unnecessary barrier that discourages truck buyers from upgrading to more modern, cleaner, and safer vehicles,” LaMalfa, a member of the Transportation and Infrastructure Committee, said in a statement. “Most heavy-duty truck owners can’t afford a $20,000 tax bill per new truck, so they don’t buy them. They’re far more likely to purchase used or older trucks with older technology that are not as fuel-efficient or don’t achieve the air quality goals the government demands.” The FET applies the tax on gross vehicle weight (GVW). This includes vehicles above 33,000 pounds, trailers above 26,000 pounds, and tractors above 19,500 pounds on their first sale.
The trucking industry has been facing disagreement from several angles. On average, the age of trucks on the road is 10 years. Representative, LaMalfa (R-CA) said, “the 12% FET limits truck replacement by discouraging truck owners from upgrading their outdated vehicles–leading to higher emissions and more dangerous roads. We won’t truly see a modern truck fleet in the U.S. until it’s repealed.”
It is apparent that the astronomical price of this tax takes precedence over the environmental and safety concerns associated with the outdated vehicles. The automobile industry has improved the technologies built into current trucks since 2000. These advancements have been made to meet emission standards to reduce the nitrogen oxide emitted by large trucking fleets by 97%. This is a dramatic improvement that would benefit to businesses nationwide. However, this upgrade in truck manufacturing has a pretty hefty price tag, adding close to $40,000 to each truck.
Allen Schaefer, executive director of the Diesel Technology Forum, is a leader in the strong efforts to encourage clean diesel technology. He expressed his views that the FET Repeal bill represents a great opportunity to accelerate the equipment turnover of existing fleets from old technology to new. He stated that new diesel engines were not only cleaner, but also more fuel-efficient. The benefits of these new trucks will not be realized while they sit on dealer lots.
“The FET discourages truck buyers from purchasing the newest, safest, and cleanest trucks and trailers available,” said Jodie Teuton, Chairwoman of the American Truck Dealers (ATD) and member of the MTF’s Steering Committee. “This tax is as outdated as biplanes and trench warfare. MTF applauds the bipartisan leadership Representatives Peterson and LaMalfa have shown by introducing this bill. MTF urges Members of Congress to cosponsor H.R. 2381 to repeal the FET, which will help turn over the truck fleet and put newer, more fuel-efficient and safer trucks on the road.”
Jodie Teuton concludes, “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.” The movement is strong, and the effort is continuing to improve and succeed in a fight to change history.
If you are a trucking owner and want to learn more about how Trucking Proud Insurance Agency (TPIA) is leading innovation in this space, please contact jamie@truckingproudins.com. If you are an insurance broker interested to learn more about joining the TPIA team to leverage these unique tools, please contact team@truckingproudins.com.
