Industry Advocates Congress to “Suspend the FET”
If you have been in the trucking industry long enough to have bought a truck, you know about the Federal Excise Tax (FET), a tax that was implemented in 1917 to help finance World War I and has been chugging along ever since, for well over a century by now!
The FET adds 12% to a heavy-duty truck’s ending price. This means a company planning to purchase a $150,000 truck better have an additional $18,000 lying around.
As the pandemic carries on, the trucking industry is urging Congress to suspend the FET through 2021.
Fret the FET
Truck sales have dropped 70% during the COVID-19 pandemic (but has begun to rise again in June), and the American Trucking Associations Chairman Randy Guillot says one of the best ways to fight the economic impact of the virus would be to suspend the FET for the time being.
The ATA has some weight behind its claim. It recorded that in 2019, sales of Class 8 trucks exceeded $33.8 billion, meaning a total tax liability of about $3.6 billion.
Furthermore, the ATA conducted a survey of its own members and found that 60% of those surveyed would be significantly more likely to purchase more new trucks were the FET suspended.
The ATA also says that, with the average Class 8 truck being ten years old, a suspension of the FET would help modernize the United States transportation industry. New trucks have many new features that were not available a decade ago:
- Lane departure warning
- Blindspot warning
- Automatic headlamps
- Automatic wipers
- Side airbags (for rollover catastrophes)
- Tire pressure monitoring
- Forward collision mitigation
Conclusion
Congress is working to come up with a new stimulus package to replace the one that expired at the end of July (and by the time you read this, may already have become law). Should the FET tax suspension be a part of this stimulus? If you would allow us to give our opinions, we say yes. Stimulus packages can exceed $1 trillion in value, so a $3.6 billion suspension does not seem that far-fetched, while also having a ripple effect on the economy.
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