Repeal the Federal Excise Tax on New Heavy-Duty Trucks – Cosponsor H.R. 1440/S. 694

 

ISSUE
Congress imposes a 12% federal excise tax (FET) on the retail sale of most new heavy-duty trucks. This tax depresses heavy-duty truck sales and delays the purchase of cleaner, safer and more fuel-efficient trucks. Despite the passage last year of a $40,000 federal incentive for “clean commerical vehicles,” the century-old FET remains a signficant barrier to adoption of today’s more energy efficient trucks. Members of Congress are urged to cosponsor H.R. 1440/S. 694 to help incentivize the replacement of older trucks with new, greener, and safer trucks. 

BACKGROUND

The FET on heavy-duty trucks was first imposed in 1917 to help pay for World War I. The 12% FET is the highest excise tax on a percentage basis that Congress levies on a product, often adding as much as $22,000 to the price of a new heavy-duty diesel truck, or $50,000 for an electric truck. The tax is imposed on top of the nearly $40,000 additional cost from recent federal emissions and fuel-economy mandates, which already makes it harder for small businesses to afford a new truck. 

 

Nearly half of the Class 8 trucks on the road are over 10 years old. Truck buyers and small businesses are increasingly holding onto their older trucks longer or purchasing used trucks and are not fully realizing the benefits of significantly improved environmental and safety truck technologies. A study conducted by an environmental non-profit, Resources for the Future, stated that “an exemption on federal excise taxes for medium- and heavy-duty electric vehicles can help reduce the price differential with diesel vehicles and make purchase incentives more effective.” Additionally, the Zero Emission Transportation Association, which supports “100% electric vehicle sales,” supports FET repeal because the FET "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…” 

 

Also, the FET has been the most inconsistent source of revenue to the Highway Trust Fund (HTF) over the past 20 years. Since FET revenue is dependent on volatile annual truck sales, the tax has contributed to the overall instability of the HTF. To establish long-term stability for the HTF, the 12% FET should be replaced with a more consistent revenue source. 

 

KEY POINTS