Congress imposed the 12% excise tax on the sale of heavy-duty trucks in 1917 to generate revenue for World War I. More than a century later, the federal government won’t release its economic stranglehold on the trucking industry.
In theory, an excise is supposed to serve as an indirect tax on items, such as airline tickets, hotel rooms, tobacco, and other goods and services. In the case of heavy trucks and highway tractors, Congress imposes the highest percentage of any item. Needless to say, this so-called “pass-along” fee has become a burden to fleets and independent truckers purchasing new makes and models. Industry sources estimate the 12% excise tally adds between $15,000 and $30,000 to the cost of a late-model semi.
On June 2, Indiana Sen. Todd Young and Maryland Sen. Angela Alsobrooks introduced a bipartisan bill called the Modern, Clean, and Safe Trucks Act that would repeal the 12% federal excise tax and likely lower the sticker price on late-model large commercial motor vehicles.
America’s economy relies on the trucking and transportation industry. Repealing this unnecessary excise tax burden would allow companies like NA Specialized Transportation & Logistics to lower freight costs, continue investing in newer commercial truck models, and improve our sustainability efforts.
Lowered Freight Costs
Proponents of the excise tax argue that large commercial motor vehicles account for a disproportionate amount of highway and road damage. However, a study published by the National Academy of Sciences concludes a properly designed highway will not be negatively impacted by the traffic it is meant to handle. That being said, the federal government does not impose an excise tax on the nearly 3 million cars, pickup trucks, SUVs, and EVs operating on America’s highways and suburban streets today.
Sunsetting the heavy truck excise tax would immediately reduce the cost of transporting more than 70% of goods and materials delivered to communities. Less expensive trucks with improved fuel efficiency would promptly lower freight rates that are passed through to consumers and would go a long way toward helping slow the rising cost of groceries, construction, farming, and household goods.
Investing in Safer & Better Trucks
Semi-truck manufacturers continue to improve safety features, fuel economy, and meet mandates to lower harmful emissions. It’s critical for trucking operations to be able to afford commercial motor vehicle loans and remain competitive. Interest rates on a truck loan can range from 4 to 20%, depending on FICO score, years in business, and down payment. For argument’s sake, consider the impact of a $30,000 excise tax at 10% over a 5-year repayment period. The interest would add approximately $8,000 to the loan, bringing the total to $38,000. That money doesn’t pay for a single axle, tire, or engine part.
Environmental Improvements
The Environmental Protection Agency and other federal agencies have vigorously pursued cleaner semi-trucks based on tailpipe emissions. One such proposal involved a 90% reduction in nitrogen oxide emissions over the next two years. Accomplishing this Herculean feat would require massive investment in newly designed semis outfitted with advanced technologies. Industry leaders dubbed the previous administration’s standard unattainable.
Fortunately, the current administration recently tapped the brakes in an effort to save the freight transportation industry upwards of $12 billion and as much as $6,000 on every new large commercial motor vehicle. While the majority of Americans want to do their part for the environment, adding an expense to the trucking industry puts mom-and-pop outfits out of business and drives up the cost of goods. By that same token, eliminating the excise tax would lower costs and encourage the purchase of cleaner vehicles.
Ensuring the Trucking Industry Is Protected
A variety of industries enjoy some government protection, but such is not the case for the hardworking men and women who transport more than 70% of everything community members see on store shelves. All told, upwards of $1 trillion of goods, or 11 billion tons, wouldn’t find their way to cities and towns without truck transportation. Trucking industry advocates do not ask for special treatment. However, paying the country’s highest excise tax for more than a century hamstrings its ability to lower freight rates, buy cleaner new trucks, and stay in business during challenging economic times.
Learn More From North American Specialized
North American Specialized is a U.S.-based transportation and logistics company. We track industry news involving changing legislation and technology to ensure we continue to provide safe, reliable, and compliant services to our customers. Visit our blog for more industry news and resources.
