Infrastructure Group Suggests Tax on Large Commercial Trucks
Infrastructure Group Suggests Tax on Large Commercial Trucks
- AuthorsBauer, David E.
- Institutional AuthorsAmerican Road & Transportation Builders Association
- Subject Area/Tax Topics
- Industry GroupsTransportation
- Jurisdictions
- Tax Analysts Document Number2019-19038
- Tax Analysts Electronic Citation2019 TNT 94-39
May 13, 2019
The Hon. Steven Mnuchin
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
Dear Secretary Mnuchin,
Upgrading the nation's critical infrastructure networks has been a high profile, national priority since the 2016 presidential election and one of the few — if only — federal policy areas that has the potential for bipartisan activity. While this dialogue is long overdue, it is time to stop talking about fixing the nation's highway, bridge, public transportation and other infrastructure systems, and start doing it.
Infrastructure can be broadly defined, but there is no debate that highway and transit improvements must be a foundation of any federal infrastructure initiative. The single largest impediment to the surface transportation network the nation needs is the Highway Trust Fund's (HTF) permanent revenue deficit. Fortunately, a wide variety of user-based revenue solutions exist that could not only stabilize the trust fund, but easily support the increased investment President Trump and members of Congress from both parties have advocated.
The federal motor fuels tax is the most effective, transparent, and equitable way to support increased highway and public transportation investment. Despite the support of business, user and labor groups, this approach has yet to gain traction on Capitol Hill. While we strongly support a motor fuel tax increase, the need to enact a meaningful solution far outweighs the merits of any revenue option. In partnership with a bipartisan group of members of Congress, ARTBA has worked to advance a trust fund revenue alternative that would capture value from supply chain shipments on the National Highway Freight Network. A vehicle-miles-travelled (VMT) tax on the largest commercial trucks — which are the predominant users of the Interstate Highway System — would renew the historic user-based foundation of the HTF and reinforce the constitutionally-based role of the federal government in maintaining and improving a national transportation system.
Specifically, the concept would impose a 25 cent per mile tax on large freight trucks (class 7 and class 8) which would raise an estimated $370 billion over ten years. These vehicles, because of Hours of Service and International Fuel Tax Agreement requirements, are already collecting mileage data, thus making this user fee very administrable with negligible overhead costs. Furthermore, because the owners of heavy trucks are already paying their Heavy Vehicle Use Tax quarterly, the administrative burden would also be minimal. Members of the commercial logistics have testified to Congress such a mechanismwould not disrupt their business operations and agree this is a viable and sustainable source of HTF revenue.
The legislative construct we have been promoting would also provide the trucking sector with permanent tax relief to reduce their operational costs. The proposal would repeal the 12 percent retail sales tax on large trucks and trailers as well as the tire tax. The plan would also reduce the federal gas and diesel fuel tax by 2 cents per gallon and then adjust the tax for inflation, raising revenue outside the 10-year budget window. Finally, to ensure all users of the highway system are contributing, the proposal imposes a new electric vehicle tax that would be commensurate with the 10-year average in federal gas tax payments from all motorists operating traditionally fueled vehicles.
The effect of this bipartisan legislation, which we expect to be introduced in the coming weeks, would be to permanently stabilize the HTF's revenue foundation, support increased federal highway and public transportation investment, and eliminate the continuing reliance on general fund revenues to support surface transportation spending.
We greatly appreciate President Trump's unwavering focus on improving the U.S. infrastructure facilities. His continued leadership in this area is critical to creating an environment that is conducive to legislative progress on good faith from both Republicans and Democrats.
Thank you for your openness to and commitment to supporting long overdue infrastructure improvements. I would be pleased to answer any questions regarding these recommendations.
Sincerely,
David C. Bauer
President & CEO
American Road & Transportation Builders Association
Washington, DC
Cc:
David J. Kautter
Highway Transportation Infrastructure Improvement and Sustainability Act
Component 1: VMT Structure to Promote Equity and Fairness
CBO estimates a [25] cent per mile tax would have generated $43 billion in 2007. Unlike the gas/diesel tax which is projected to show steady declines in revenue generation beginning in 2019, the Federal Highway Administration projects total freight tons shipped in the U.S. will grow 49 percent in the next three decades and trucks will carry percent of U.S. freight.
This proposal creates new structure that imposes a fee of [25] cents per mile travelled in the United States on class 7 and 8 trucks. This fee is a freight-based user fee that is consistent with the existing 6.25 percent Air Cargo Tax structure imposed on air freight services that has generated revenue for the Airport and Airway Trust Fund since 1970.
The tax would be paid by the owner of the vehicle and remitted to the IRS.
Most importantly, the revenue captured by this VMT model would be placed in a newly created Highway Trust Fund account dedicated only to critical and urban freight corridors, ensuring a direct ROI for Class 7 and Class 8 users.
Component 2: Tax Code Simplification by Eliminatiing Two Non-Fuel Related Taxes
The plan also proposes to repeal all federal truck taxes that are not fuel-related (the tire tax and the 12 percent tractor tax). This component would provide the trucking industry with approximately $6 billion in tax relief each year.
Moreover, as a means to further address concerns about a new fee, the plan would reduce the federal gasoline and diesel taxes by 2 cents up-front and then immediately index these rates to inflation moving forward. It is projected that indexing would recoup the 2 cent reduction just outside the 10-year budget window — a point that would allow the indexation not to be considered a tax increase for scorekeeping purposes.
Component 3: Parity for All Fuel Sources
This framework would impose a new tax on electric vehicle batteries at a rate of [$1,062]. Fully electric motor vehicles currently do not contribute to the Highway Trust Fund. This amount reflects the 10-year equivalent of what motorists would pay under gasoline taxes. In order to avoid taxing the consumer, the fee would be paid as part of the vehicles manufacturing. The intent of this provision is to ensure parity between roadway users in terms of their financial support of the system on which their vehicles rely — regardless of how that vehicle is propelled.
RESULT:
A permanently stabilized Highway Trust Fund, potentially eliminating the donor/donee state issue.
A 24 percent increase in federal surface transportation investment, creating roughly $37 billion in new revenue annually.
Elimination of the trust fund's reliance on general funds to support 35 percent of highway/transit spending.
- AuthorsBauer, David E.
- Institutional AuthorsAmerican Road & Transportation Builders Association
- Subject Area/Tax Topics
- Industry GroupsTransportation
- Jurisdictions
- Tax Analysts Document Number2019-19038
- Tax Analysts Electronic Citation2019 TNT 94-39
