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In July, the Modern, Clean, and Safe Trucks Act of 2021 was introduced by Senators Todd Young (R-Indiana) and Ben Cardin (D-Maryland). This bipartisan bill would repeal the existing 12% excise tax in the trucking industry, making it more affordable for carriers to purchase modern, fuel-efficient trucks. The bill argues that the excise tax “discourages the replacement of older, less environmentally clean and less fuel economical vehicles.”

Excise taxes are imposed on various goods, services, and activities on their first retail sale. In the logistics industry, this tax is applied to the purchase of new trucks, tractors, and trailers. The current law means that on top of normal sales taxes, an additional 12% excise tax is applied, which can add up to $20,000 to the purchase price of new machines. This tax is not applicable to resold trucks, which already carry with them a lower price tag than their fresh-off-the-lot counterparts.

What does the Federal Excise Tax (FET) fund, exactly? Originally, the FET was introduced to help finance the U.S. involvement in World War I. Now, the revenue generated is used to repair and expand the federal highway system – meaning that with the loss of this tax, the U.S. will need to find alternate means of funding these repairs.

Throughout the COVID-19 pandemic, the average age of medium and heavy-duty trucks on the road decreased approximately 1-1.5 years, indicating that truck owners were buying new trucks and older trucks were being taken off the road.

A truck is defined as a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it’s equipped to tow a vehicle, such as a trailer or a semitrailer – meaning that this tax affects everyone who is looking to buy a semi-truck in the industry. When a truck or trailer is resold, no excise tax is imposed on it, which encourages people to purchase their machines second hand. Normally, reselling used products is great for sustainability, but when old trucks remain on the road, they tend to be less fuel efficient than their more modern counterparts.

Truck manufacturers are modernizing and becoming more fuel efficient than their predecessors:

  • Freightliner’s 2020 Cascadia is 35% more fuel efficient than the first-generation Cascadia launched in 2007.
  • Mack’s Anthem uses energy recovery technology to capture the engine’s exhaust and convert it into mechanical energy used as additional torque, resulting in up to a 9.5% gain in fuel economy.
  • Volvo Trucks’ 2020 VNL 760 and 860 are more lightweight and aerodynamic than the previous model, enhancing fuel efficiency by up to 11%.

These modern trucks come with a heftier price tag than their older, used counterparts, and the excise tax adds an additional 12% to the purchase price. Eliminating this tax will help make environmentally friendly trucks more affordable and accessible for fleets of all sizes, encouraging environmental sustainability in an industry notorious for its carbon footprint.