We all do things in an emergency that are out of the ordinary. Later, crisis over, we shift back to normal.
That is how the Federal Excise Tax (FET) on new trucks came to being, according to research by the American Transportation Research Institute (ATRI) (https://truckingresearch.org/). It was 1917, World War 1, and the government needed money for the military. One means enacted was excise taxes on the purchase of a wide variety of goods, including “automobile trucks and automobile wagons” and their associated parts.
The war over, nearly all the other excise taxes were repealed during the following century. But the FET on the purchase of a new “truck, trailer, and semitrailer chassis and bodies, and tractors” remained. It began at 3 percent back; today it is 12 percent.
ATRI explains that excise taxes are typically levied for two reasons: raising revenue and discouraging certain purchases. The second reason may underly the continued excise taxes on tobacco, alcohol and guns. Yes, the FET on new trucking equipment raised revenue over the years (though not a major amount compared to other highway-related sources). But should government tax policy discourage the purchase of new trucking equipment?
Two cogent reasons are laid out by ATRI on why new trucking equipment is beneficial to society and should not be discouraged: 1) new trucks are more fuel efficient and environmentally friendly; and 2) new trucking equipment comes with advanced safety features that reduce crashes and save lives. (And, by the way, adding 12 percent to the cost of new equipment allows higher prices on the purchase of used trucks.)
The FET also fails the test of a good tax. It is only paid by purchasers of new equipment. It is often complex to calculate. And its potential revenue fluctuates widely with truck equipment purchase activity.
ATRI suggests that a repeal of the Truck FET could be replaced by an 11.2-cent increase in the federal diesel tax – less than the last time the diesel tax was adjusted for inflation, a 52.7 increase in 1994. The federal diesel tax is paid by all truckers, does not require calculation at each purchase, and directly reflects highway use. Plus, removing the FET promotes fuel efficiency and improved safety – goals we all support.