Bill Proposes to Eliminate Equipment Tax that Feeds Highway Trust Fund

Rep. Doug LaMalfa, R-Calif., and Rep. Collin Peterson, D-Minn., introduced H.R. 2381, the Modern, Clean, and Safe Trucks Act of 2019, on April 30 that would repeal the current 12 percent federal excise tax or FET on heavy commercial trucks and trailers. Though monies generated by the FET tax goes into the Highway Trust Fund, Rep. LaMalfa called that revenue “unreliable” since the high price of new trucks and trailers makes sales “inconsistent” year-to-year.

[Above photo by the Arizona Department of Transportation.]

On average, he said the FET adds between $12,000 to $22,000 to the final sale price of a new truck.

Rep. Doug LaMalfa

“Most heavy-duty truck owners can’t afford a $20,000 tax bill per new truck, so they don’t buy them,” he said in a statement. “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 – the highest percentage-based tax that Congress imposes on any product – limits truck replacement, the associated economic growth, and needs to be repealed.”

Rep. Peterson added that “the FET is an outdated burden to small businesses looking to invest in our transportation industry. Repealing this tax would encourage new, and cleaner fuel-efficient vehicles on our roads.”

Rep. Collin Peterson

Previous analysis of Highway Trust Fund revenues showed that revenue from retail truck taxes reached only $3.117 billion in fiscal 2017, down by 27 percent or $1.148 billion; a drop that was more than enough to offset the relatively small gains from motor fuel user fees.

Those numbers reflect the volatility that stems from such revenue streams as equipment sales, which can fluctuate sharply based on market demand or changes in interest rates for high-cost purchases, noted Joung Lee, policy director for the American Association of State Highway and Transportation Officials, in a 2017 interview.

“Congress and the nation cannot depend on the trust fund’s current mix of fees to even keep growing year to year, depending on market conditions, and it continues to generate far less than Congress has authorized the trust fund to spend,” he explained.

Rep. LaMalfa added that the original purpose of the FET – introduced at a rate 3 percent over 100 years ago to help pay for the costs of military intervention in World War I – has long expired, making it “outdated and unnecessary.”

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