“… in this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin
Founding Father Franklin was likely most concerned with taxes on tea, kites and bifocals, and likely never could have imagined how taxes on certain goods would spiral once we’d pushed His Majesty’s Army back across the Atlantic.
Mr. Franklin certainly did not imagine a tax that would be exclusively levied on heavy trucks.
If a fleet in Findlay, Ohio, bought 10 Peterbilt Model 579s for about $1,375,000 from Ohio Peterbilt, it would pour in an additional $165,000 in Federal Excise Taxes (FET).
The FET on heavy trucks has grown from 3% to 12% since it was instituted in 1917 to help fund World War I.
About 40,000 people live in Findlay, just south of Toledo, but all the cash from that trucking company’s FET is going to get dumped into the Highway Trust Fund, a fund already supported by the transportation sector every time it pulls up to the fuel island and into the tire shop. Revenue from the federal taxes on gasoline ($25.8 billion) and diesel fuel ($10.5 billion) accounts for 84% of the trust fund revenues.
One Class 8 truck kicks money into the Highway Trust Fund once through the FET, annually through a use tax and perpetually through taxes on fuel and tires.
That Ohio fleet may never even drive on the roads their truck purchase helps finance, and without the FET, our fictitious Findlay trucking company could have purchased an eleventh truck with almost $30,000 to spare to support it. A recent survey conducted by the American Truck Associations (ATA) revealed that nearly 60% of fleets were somewhat or very likely to buy additional trucks and/or trailers beyond their scheduled buy if the FET were eliminated.
Trucking already funds the account disproportionately compared to its four-wheeling cousins.
There’s not an FET on new passenger vehicles and there’s no excise tax on car and light truck tires as long as its carrying capacity is 3,500 pounds or less. There are about 275 million vehicles on the road sharing in the $25.8 billion tax on gasoline: about $94 per passenger vehicle (and truckers drive those, too). Just more than 3.5 million trucks share in the $10.5 billion in diesel fuel taxes: about $3,500 per truck.
The goal of the Highway Trust Fund is noble: to spread funds around and ensure that everyone has adequate roads to drive on. If all these dollars stayed home, the highways in Texas and California would be paved with diamonds while roads in rural Montana would still have have wagon ruts left in them from the 1800s. It’s a nice idea, but times have changed and current load and rate volatility doesn’t inspire the kind of confidence trucking companies need to re-invest in equipment knowing they’re staring down the barrel of a 12% add-on right off the top.
The government consistently mounts pushes for the trucking industry to reduce its carbon footprint and cut its number of accidents, but the FET actually de-incentivizes it.
Trucking stood tall in its COVID response when business conditions for anyone not hauling consumer goods was just as bad or worse than they were for any store not selling toilet paper and hand sanitizer. It’s time Washington stood behind all those “thank you” Facebook posts and gave trucking companies a break.
A group of industry stakeholders (ATA, National Association of Truckstop Operators and American Truck Dealers, and many others) have mounted an honorable push to have the FET suspended through next year, which would help ignite new truck orders that are well off-pace from pre-COVID expectations. They’ve gotten some traction with D.C. legislators, but we’ve been to this point before. Prior pushes calling for the outright repeal of the FET received support but never enough to push it through.
The effort to suspend it looked promising but the first draft of the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act – a $1 trillion economic stimulus bill – includes provisions for the extension of unemployment benefits, liability reform and small business relief, but it doesn’t include the FET suspension.
If lawmakers want to get cleaner burning, more fuel efficient and safer diesel trucks on the highway, throw small business owners (like the majority of most trucking companies) a bone. Charging them extra to better themselves (along with the air quality and the highway) is foolish, and Ben Franklin had some famous quotes about fools, too.
Trucking may have to turn to another great thinker, Alexander Graham Bell, for inspiration. Pick up the phone and call your legislators. They want your vote and you need their help.