12% new-truck tax panned at highway funding hearing

WASHINGTON — Major trucking firms and their supporters have called for repealing a long-standing 12% tax on new tractors and trailers as a way to promote cleaner-burning vehicles, but a California lawmaker argues that the tax is also an inefficient way to prop up the Highway Trust Fund (HTF).

Speaking Wednesday at a House Transportation and Infrastructure subcommittee hearing on ways to cure the ailing HTF, Rep. Doug LaMalfa, R-Calif., agreed with groups such as the American Trucking Associations, the Truckload Carriers Association and the National Tank Truck Carriers that the 12% federal excise tax (FET), instituted in 1917, is a disincentive for buying newer and cleaner trucks.

However, “we also see it’s cyclical,” LaMalfa said, “because truck sales more or less move with the economy, with the amount of goods moving in the supply chain. So it’s not a source of funding that’s as steady as would be under other tax forms. So it’s important that when we have a discussion on the continuity of the revenue in the Highway Trust Fund, we also look at a way to relieve the burden on those who buy new trucks.”

LaMalfa encouraged support for a bill he is sponsoring, the Modern, Clean, and Safe Trucks Act, which would repeal the 12% FET “and distribute that [funding] burden over a wider population.”

Of the $1.4 trillion of tax receipts pumped into the Highway Trust Fund since its inception in 1956, about 8% — $114 billion — has been through the 12% FET on new tractors and trailers, according to testimony from Jeff Davis, a senior fellow at the Eno Center for Transportation, who also participated in the hearing.

Davis testified that Congress continues to give the HTF, which pays for highway and transit projects through revenue raised by gas taxes as well as the FET, “a privileged place in the budget process” while “pretending” that the HTF remains solvent.

“The reality is that the trust fund is only projected to be 82% self-sufficient [in FY2024], with that solvency dipping rapidly until the trust fund is only 60% self-sufficient [in FY2026], and dipping below 50% self-sufficient in 2031,” based on the latest projections by the Congressional Budget Office, he said.

Declining rates of miles traveled, fuel-efficient cars and Congress’ failure to cut spending or increase the gas tax have all contributed to the HTF funding crisis. Lawmakers since 2008 have been covering the shortfall with money transferred from the U.S. Treasury’s general fund, including $118 billion authorized by the Infrastructure Investment and Jobs Act in 2021.

“It’s time to either mend, or end, the Highway Trust Fund,” Davis contended.

“Either cut spending and/or increase user revenues to the point that they meet once again, or abolish the Trust Fund, devote the five existing user taxes back to the general fund, and have highway, mass transit, and highway and motor carrier safety funding fight it out with all other programs through the budget process.”

Officials from Oregon and Washington testified on the success of state-level programs that are transitioning HTF revenue sources away from fuel taxes and instead charging vehicles by the mile instead of by the gallon.

Related articles:

• Owner-operators seek one-year suspension of heavy vehicle tax
• What happens to freight if the government shuts down?
• Watchdog pushing feds to move on truck user fee pilots

Click for more FreightWaves articles by John Gallagher.

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