The Biden administration’s recently proposed vehicle emissions rule is aimed at boosting production of clean cars and trucks. But a century-old tax on new heavy-duty trucks means the trucking industry could have to pay more to keep up with climate goals. 

Many in the trucking industry have long advocated repealing the 12 percent federal excise tax on the first sale of a heavy truck used on a highway, which can add up to $30,000 to the price of a high-end rig. And they’re confident they will receive more interest from lawmakers as Democrats in Congress and President Joe Biden look to expand the nation’s clean vehicle fleet equitably and affordably. 

“Eliminating the [tax] will reduce the cost of new technologies by tens of thousands of dollars and is a technology-neutral solution that allows companies to invest in not only battery-electric, but alternative fuel vehicles as well depending on the availability of infrastructure to support the specific technologies,” Andrew Boyle, vice chair of the industry organization the American Trucking Associations, said at a Senate hearing last Tuesday. 

Although the tax is placed on the seller, dealers factor the tax into the price tag of a new truck. And new safety and emission-reducing equipment is likely to jack up new big-rig prices, which the federal excise tax will only exacerbate.

Just a few weeks after ATA, the American Truck Dealers and Zero Emission Transportation Association sent a letter to congressional leaders urging them to reconsider the tax, Rep. Doug LaMalfa, R-Calif., along with Rep. Chris Pappas, D-N.H., reintroduced a bill to repeal the truck excise tax.

“The FET is the highest percentage excise tax on anything in this country,” LaMalfa said in a March floor speech. “It disincentivizes truckers and trucking companies from purchasing new, up-to-date rigs. … Repealing this tax would make it easier to ship goods across the country at lower prices for consumers, saving businesses and consumers money.”

Sen. Todd Young, R-Ind., introduced the companion bill (S 694) along with Sen. Benjamin L. Cardin, D-Md.

Highway Trust Fund

The federal excise tax on trucks was enacted in 1917 to defray the costs of World War I and eventually the Great Depression, World War II and the Korean War. It’s now used to make up for declining Highway Trust Fund revenues as the federal government struggles to find funding mechanisms other than the gas tax. 

Some smaller fleet owners in the trucking industry are wary of repealing the federal excise tax until there’s a better idea of how to backfill the lost Highway Trust Fund cash. 

According to 2021 Congressional Budget Office testimony before the Senate Finance Committee, the truck and trailer excise tax accounted for 12 percent of the Highway Trust Fund revenues in 2019, or about $5 billion. The excise tax on various fuels, which historically fed the fund, brought in about $36 billion, but Congress still had to transfer $118 billion to the fund under the 2021 infrastructure law (PL 117-169) to stabilize the account through 2026. 

A spokesperson for the Owner–Operator Independent Drivers Association, a trucking organization advocating for small-business truckers, explained the repealed excise tax would primarily enable large carriers to purchase new trucks while smaller carriers will likely still struggle to afford new rigs. 

Without the excise tax to backfill the fund, small trucking businesses are worried they will be stuck paying more taxes while larger carriers replace their fleets with new trucks, putting them at a competitive disadvantage.

“The fact these proponents [of the repeal] … have never shown any interest in identifying an offset leads us to believe they are perfectly comfortable allowing everyone in trucking to help pay for their new trucks,” the spokesperson said.

Bill Sullivan, ATA’s executive vice president for advocacy, argued the extra funding for the Highway Trust Fund in the infrastructure law has made the account “safe” for the time being, although it’s clear further government action is necessary to replace lost funds from the tax. 

He added that taking the federal excise tax off of new trucks will have a “cascade” effect and also benefit small carriers, even if they’re not able to purchase brand-new big rigs. 

“Larger companies with a lot of capital will buy more trucks. They will put more of these cleaner, post-2010 trucks into the secondary market,” Sullivan explained. “Medium-sized companies will buy some new trucks and some used trucks, and the whole age of trucks on the road will significantly upgrade — and that is a massive … opportunity to make the air cleaner on our way to a zero-emission future.” 

Sullivan said he’s confident that discussions around supply chain issues and cleaner transportation on Capitol Hill are creating enough fervor to move legislation to repeal the tax in this Congress, and a congressional aide said there has been an uptick in interest among lawmakers. 

“We agree now’s the time, and a lot of it is because of these requirements,” Sullivan said.

The Senate is also likely to vote on a joint resolution this week that would roll back EPA’s regulations for smog-forming emissions — a rule that triggered an outcry from small-fleet truckers over increased costs for trucks and shipping in general. Although the resolution is unlikely to make it past Biden’s desk, it signifies increased support for the industry.