ATRI Proposes Alternative to Federal Excise Tax
The American Transportation Research Institute (ATRI) has said on numerous occasions that the Federal Excise Tax (FET) is an inefficient system of collecting money that’s externalities cause it to not be worth the struggle, but seldom does the other side of the equation come into question: the shortfall in funding that removing the FET altogether would bring. ATRI has a solution.
Quick FET Breakdown
They say there is nothing more permanent than a temporary government program, and perhaps that is best exemplified with the FET on commercial vehicles. Originally a 3% tax to help finance World War I, it is now 100 years old and at 12%.
With no World Wars going on (and hopefully none on the horizon!), where is this money going? The Highway Trust Fund, used to repair roads.
With billions of dollars collected by the FET, repealing it would surely lead to more dilapidated roads, an unthinkable strategy considering how America’s roads already leave a bit to be desired.
Solution
Instead of collecting the money upfront in the form of the FET, ATRI suggests that the federal government can instead impose a tax increase of two cents per gallon of diesel fuel.
Assuming the FET brings in $20,000 per vehicle, it would take one million gallons of diesel fuel for the federal government to break even.
Even when trucks are running longer than ever, thanks to technological advancements, it is borderline impossible that a truck will consume 1,000,000 gallons over its useful life.
The remaining shortfall, ATRI argues, would be compensated for by having the benefits of retiring older trucks and putting newer and newer trucks on the road, namely, reductions in emissions and injuries/casualties from collisions.
Conclusion
As with all things we cover from the ATRI, the report makes for an interesting read. If you want to delve deeper into their findings, you can do so at the relevant ATRI webpage.
We believe that repealing or even reducing the percentage of the FET would do wonders for the trucking industry; just going back to the original 3% tax levied on new vehicles would significantly reduce the incentive to keep older trucks on the road.
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