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ATA pushes tax swap, asks for 6.3-cent hike in federal diesel tax

By John D. Schulz, Contributing Editor
April 04, 2012

In an unusual move that likely is dead on arrival in an election year, the trucking industry is asking Congress to raise the federal fuel tax on diesel in exchange for dropping a 12 percent federal excise tax on large trucks.
In a plan that could cost shippers higher freight rates and fuel surcharges, the American Trucking Associations (ATA) is pushing for the unusual swap in an attempt to provide a more stable source of revenue for improved infrastructure spending.
At a time when a long-term highway bill is stalled in Congress and unlikely to pass until after the November elections, the ATA is backing a bipartisan bill in Congress that would provide what the trucking lobby calls a “modest” increase in diesel fuel taxes.
The bill—H.R. 4321—has been introduced by Reps. Jim Gerlach, R-Pa., and Earl Blumenauer, D-Ore., and endorsed by the ATA. If adopted, new trucks will be more affordable in this country but diesel fuel taxes would increase.
The federal tax on fuel—23.4 cents for diesel, 18.4 cents for gasoline—has been unchanged since 1993. Because of inflation, the federal fuel tax does not provide enough funding into the Highway Trust Fund, which repeatedly has had to have an injection of funds from the general treasury the past few years in order to remain solvent.
The bill is considered a long shot to pass in an election year. Congress has been unwilling or unable to find a stable source of funding for a long-term highway bill. Instead, it recently passed the ninth short-term extension, continuing funding at the old level for the next six months.
ATA President and CEO Bill Graves calls the fuel tax for excise tax swap a good deal and a tradeoff the trucking industry seems willing to make.
Graves said the proposal “would not only reinforce the ailing Highway Trust Fund, but would provide a boost to U.S. manufacturing and speed adoption of environmentally friendly technologies.”
Defying conventional wisdom which says no tax increase ever passes in an election year, Graves said the Gerlach-Blumenauer proposal is exactly what the country and the trucking industry needs at this time.
“It is exactly the kind of pro-growth, deficit-trimming legislation that lawmakers should be looking at as they seek to address our nation’s economic woes,” Graves said in a statement.
The bill would see the federal diesel tax go up 6.3 cents per gallon. But because fuel sales are more consistent than the notoriously cyclical new Class 8 truck market, the new tax increase would provide a more stable long-term source of funding than the excise tax.
“Revenues from the excise tax are only paid into the Highway Trust Fund when new trucks are purchased, but when truck sales slump, it puts even more pressure on the already overextended fund,” Graves said. “By collecting more in the diesel tax, the federal government could ensure a more stable and predictable source of funding for needed highway and bridge projects.”
The elimination of the excise tax—about $15,000 on the cost of new truck that costs about $125,000—would spur sales of new trucks, providing a boost for manufacturing and accelerate the adoption of new technologies aimed at improving safety and fuel efficiency, Graves added.
“Legislation like this is a win-win for the government and for the business community and should be swiftly enacted,” Graves said.

In a related tax development in Washington, lawmakers are mulling extension of a popular bonus depreciation for capital spending. That 100 percent bonus depreciation was begun in 2010 as part of President Barack Obama’s economic stimulus package. It has worked like a charm, spurring near-record Class 8 truck sales the past two years.

But it expired at the end of the 2011. Sen. Christopher Coons, D-Del., has introduced a bill that would extend the tax break for fleets until the end of this year. That would mean that fleets could deduct 100 percent of the purchase price of heavy trucks in the first year, rather than spread the deduction over several years.

About the Author

John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.

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