ATD Chairman: Tax Reform Debate Has Begun in Nation’s Capital
BY STEVE PARKER, APRIL 2017
The debate on tax reform is currently underway in Washington, D.C. The House Republican leadership released their “tax blueprint.” It is an outline for tax reform legislation that's projected for later this spring. The new administration presents one of the best opportunities for tax reform in decades. However, it's important to note that it's still very early in the tax writing process and legislation has not been released.
The goal of tax reform is to lower tax rates by closing tax loopholes and eliminating deductions. When it comes to our industry, the American Truck Dealers (ATD) has always been vigilant of changes in LIFO and the Estate Tax. The good news is that the blueprint is set to uphold LIFO and the dealers' inventory accounting method. ATD has made it a mission to let Washington know that repealing LIFO would take away working capital from the nation's truck dealerships-capital that is used to create jobs.
This is one of the blueprint's favorable provisions.
An unknown factor are LKEs which allow companies to defer taxes on the sale of existing business assets when replacing them with new products. The blueprint does not address how LKEs would be treated, but restricting or eliminating them would likely decrease the purchase of new trucks. It could also result in increased taxes on lessors with subsequent higher lease payments for customers. Therefore, ATD is advocating that Congress oppose any efforts to limit LKE provisions since they encourage dealers' capital investment.
And speaking of the dealer's capital investment, I'm happy to report that the blueprint seeks to eliminate the estate tax. This would hugely benefit truck dealers nationwide. Since its inception, the estate tax has been harmful to our dealerships since assets-such as our land-can't easily be liquidated to pay the tax without destroying the viability of our stores. ATD looks forward to seeing the elimination of the dealer estate tax.
And when it comes to a harmful tax, there is none greater than the Federal Excise Tax (FET) that's imposed on our industry. Congress already imposes a 12 percent FET on most new heavy-duty trucks-the highest excise tax on a percentage basis of any industry. The FET routinely adds $12,000 to $22,000 on the price of a new heavy-duty truck. Unfortunately, Capitol Hill has made proposals to further increase the FET so that revenue will be raised for the depleted Highway Trust Fund. As we all know, a further increase in the FET would severely depress new heavy-duty truck sales and delay the deployment of cleaner, safer and more fuel-efficient trucks. In the last Congress, ATD supported H. Con. Res. 33/S. Con. Res. 40, bills that would have put Congress on record opposing an increase in the 12 percent FET. In January, the ATD board voted to support a new bill to eliminate this onerous tax. The tackling of comprehensive tax reform presents ATD with the opportunity to inform our elected officials on the FET's detrimental impact and how it negatively impacts safety, the environment and our trucking industry overall.
Finally, all dealers should be aware that the blueprint eliminates the deduction for net interest expense, and it creates a brand new provision for product importers. It's called the “Border Adjustment Tax” or BAT. The BAT is not a tariff but it could significantly increase the cost of goods, specifically a 20% tax on imported products and exempts exports. This cost could very well get passed down to the American consumer. We could see price increases from the items on grocery store shelves to the cost of gasoline. ATD will continue to monitor any progression in the BAT and the possible consequences it holds for the truck industry.
ATD is committed to helping Washington understand that any threat to truck affordability is a threat to selling the nation's fleets and a threat to economic growth. On behalf of ATD, let us all make sure that our return is a strong one.
Visit nada.org/ATD to learn more about tax reform and how you can get involved with ATD.
Steve Parker is chairman of ATD, a division of NADA in Tysons, Va., which represents 1,800 heavy- and medium-duty truck dealerships. He is president of Baltimore Potomac Truck Centers in Linthicum, Md., which operates five full-service commercial truck dealership locations with Mack, Volvo and Hino Trucks franchises in Maryland and Virginia.