Federal Excise Tax Repeal

Background

Waste and recycling collection trucks work around the clock to maintain a clean environment and protect the public health. Newer model trucks benefit both the industry and the public with improved safety measures and cleaner, greener and quieter trucks.

More than half of Class 8 heavy-duty trucks on America’s roads are now over a decade old. These outdated trucks lack technological advancements such as enhanced safety, fuel efficiency and heightened environmental standards that benefit the public.

Due to recent federal emissions and fuel-economy mandates and industry innovation, new trucks have made significant reductions in particulate matter (PM) and nitrogen oxide (NOx) emissions. Heavy-duty trucks manufactured post-2009 reduced their PM levels by 90%. The EPA has projected a 90% NOx reduction efficiency for all heavy-duty trucks starting with model year 2010.

Congress imposes a 12 percent federal excise tax (FET) on the retail sale of most new heavy-duty commercial trucks. This is the highest excise tax on a percentage basis that Congress levies on a product, adding on average over $35,000 to the price of a new waste and recycling collection truck.

This tax depresses sales of heavy-duty commercial trucks and delays the purchase of these cleaner, safer and more fuel-efficient trucks. The FET is levied on top of the nearly $40,000 in additional costs resulting from the recent federal emissions and fuel-economy mandates. Combined, these make it very difficult for small businesses to afford a new truck which has the effect of keeping older trucks on the road long past their replacement dates. Additionally, truck manufacturing and assembly employment in the U.S. is significant and the FET negatively impacts these jobs.

Although FET revenue is dedicated to the Highway Trust Fund (HTF), it has been the HTF’s most inconsistent funding source over the last 20 years due to the volatility of annual truck sales. This in turn has contributed to the instability of the HTF.

Congress should repeal the FET in upcoming surface transportation infrastructure legislation and replace it with a more consistent revenue source to create long-term stability for the HTF. FET repeal will also help get older trucks off the roads and replaced with newer and greener trucks, modernize America’s truck fleet and protect U.S. jobs.