The federal excise tax (FET), enacted in 1917 to help fund World War I, is an outdated, inefficient way to collect a use tax on trucks, the American Transportation Research Institute says. The 12% levy is also a barrier to increasing the safety and sustainability of trucks, a recent study finds.
What is the FET?
The FET was originally a 3% tax on trucks enacted with a slew of other excise taxes to help pay for the war effort in World War I. Also taxed, the ATRI says, were pianos (5%), toboggans (10%), hunting garments (10%) and sword canes (100%). At some point, most of these taxes were discontinued, but the FET on trucks and trailers remained, increasing to 8% in the 1950s and up to its current 12% level in 1983.
Dealers collect the FET when trucks, trailers and other equipment is purchased, and that can present problems for dealers when the tax is calculated or remitted improperly.
“It creates a lot of gray areas, a lot of subjectivity and interpretations,” CPA Tim Reynolds told TPS last year. Reynolds is an expert on FET and partner at DHW CPAs and Strategic Advisors. “A lot of dealers get in trouble by not knowing the rules and not interpreting them correctly in order to get the sale.”
On the typical sale of a new Class 8 tractor, ATRI says the FET can be $20,000 or more, sometimes even more than $40,000 depending on the truck and trailer type. When looking at pricier rigs, such as zero emission vehicles (ZEV), ATRI calculated it can be north of $50,000. That cost, the institute says, can keep buyers from pulling the trigger on a new, more efficient and safer truck.
Where does the FET go?
Collected FET goes into the federal Highway Trust Fund (HFT), which distributes the funds into the highway account and the mass transit account. The highway account, as the name suggests, funds roadway-related transportation funding and received 87% of HTF revenue in 2023. The mass transit account funds public transit and gets about 13% of the funding.
The truck FET represents about 14.1% of HTF revenue. In 2023, the IRS collected $6.78 billion in FET on trucks.
How does FET relate to truck sales?
ATRI contends one reason the FET is an inefficient way to collect money for the HFT is because truck sales are cyclical, creating an uneven generation of taxes. In the past 20 years, the institute says, sales have varied between 95,000 to nearly 300,000 trucks per year.
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During that time, the cost of a truck has increased nearly 70%, with the most steep price jumps coming during the last couple of years. With that increase comes a sharp jump in excise taxes. ATRI says the average Class 8 excise tax of $12,000 in 2004 is now more than $20,000 by 2023.
Some of that increased cost in Class 8 trucks comes from new technologies that make them cleaner and safer than older models. ATRI estimates of the 3.66 million registered the U.S. in 2023, more than half a million were older than 2000 models. Another 395,630 were 2000-2005 models; 296,497 were 2005-2010 models; the remaining 2 million or so trucks are newer still, up to model year 2023.
Repealing the FET, ATRI says, would encourage new truck sales. At the current FET rate, it would take more than 18.5 years to replace the existing Class 8 fleet with the newest equipment. With an FET repeal, the ATRI calculates a 20% increase in sales, meaning the fleet would turnover in about 15 years.
What does an FET repeal mean for sustainability?
Newer trucks are full of technology that makes them more expensive, but also more fuel efficient with cleaner emissions.
“Newer trucks have a smaller environmental footprint than older trucks due to improvements in vehicle aerodynamics and engine-related technology advances that enhance operational efficiencies,” ATRI’s report says. “While many efficiency improvements are introduced to meet federal emissions standards set by the U.S. Environmental Protection Agency (EPA), a more fuel efficient truck is also a critical objective for motor carriers who seek lower operating costs.”
ATRI says in the last 25 years, truck manufacturers have improved emissions by 38.4%. The institute argues an FET repeal would encourage new truck sales, saving millions of metric tons in carbon emissions churned out by older, dirtier truck technologies. It also points out newer trucks emit less particulate matter and oxides of nitrogen (NOx).
What does an FET repeal mean for safety?
The increase in truck sales spurred by an FET repeal would also make trucking safer, the ATRI contends, because newer trucks have more advanced driver aids lower risk. Using that same 20% sales increase level, an accelerated adoption of automatic emergency braking (AEB) would mean 1.11 billion protected miles and the increased use of forward collision warning (FCW) systems would mean 1.08 billion protected miles.
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With each protected mile, costs could potentially go down when it comes to safety. The Insurance Institute for Highway Safety (IIHS) found Class 8 trucks with AEB saw a 12% reduction in crashes per mile and trucks with FCW had 22% fewer crashes per mile.
“The total annual net benefits that result from a truck FET repeal is estimated to include a decrease of 729 crashes per year (including eight fewer fatal crashes) and nearly $245 million in combined direct and societal costs,” ATRI says. Over the next decade, that savings skyrockets to more than $13.4 billion.
Part of safety is proper maintenance. Maintenance and repair on older trucks can be higher per mile than on newer trucks, so a buying newer, FET-free trucks may lower costs for maintenance and repair work. The institute compared costs per mile for trucks of different ages. Trucks older than 2010 cost between $0.80 cents per mile for the oldest models and around $0.20 cents per mile for models up to 2010.
“Although newer trucks have very complex engines, costly parts and more sophisticated diagnostics, they can operate far more miles in a year without major (repair and maintenance) issues,” ATRI says. “Alternatively, older trucks operate substantially fewer miles and break down more frequently. As miles annually decline on older trucks, their per-mile R&M costs skyrocket.”
Alternatives to FET
ATRI alleges FET is an inefficient way for trucking to pay its use fees for highways. It only applies to certain new truck and trailer purchases and is only collected once per vehicle rather than being tied to roadway use. Furthermore, the complexity of the FET may mean some dealers are collecting incorrectly, leading to more or fewer collections than there should be. Because of the cyclical nature of Class 8 sales, projecting collections can also be difficult.
Instead, the institute’s study introduced several solutions to plugging the FET gap in the HFT. One is a road user charge that tracks mileage and collects a fee based on roadway usage, and another is a federal registration fee. But the solution ATRI finds most efficient is an increase to the existing motor fuels tax.
A 2-3 cent tax increase in that category would be less painful, ATRI contends, because inflation has decreased the burden of fuel tax, last adjusted in 1994.
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“Considering the increase in vehicle efficiency over more than three decades, the per-mile burden of the fuel tax has decreased even further across the years,” the study says.
What is happening now?
There is a bill in the House of Representatives, The Modern, Clean and Safe Trucks Act of 2025, that would repeal the FET. Ahead of that bill’s introduction, industry leaders took to the Hill to talk about the HFT and its funding through the FET.
The trust fund has a projected deficit of more than $270 billion from 2025 to 2034, the Tax Foundation says. To close that gap and keep funding, Owner-Operator Independent Drivers Association (OOIDA) Executive Vice President Lewie Pugh advocated for the same solution as ATRI — raising the fuel tax.
“If Congress is considering raising revenue, it should have the political courage to do this through proven, cost-effective methods like fuel taxes instead of methods like tolling that may limit political consequences but disproportionately harm truckers,” he said.
John Elliott, executive chairman of expeditor Load One and past chairman of the Truckload Carriers Association, says he also supports raising the fuel tax, so long as it is indexed to an appropriate annual cap as needed and all generated funds are dedicated to critical highway infrastructure projects. While on the Hill, he also pitched repealing the FET.
“The high cost of the FET slows fleet modernization, directly impacting safety and environmental goals,” he told members of Congress, adding 60% of fleets say they would be somewhat or very likely to purchase more trucks were the FET eliminated.
The bill, HR 2424, was sponsored by Rep. Doug LaMalfa (R-Calif). It was referred to the House Committee on Ways and Means and has the support of the American Trucking Associations.
"Keeping this antiquated tax on the books imposes an enormous hardship, particularly for the small fleets, family businesses, and independent truckers who make up the overwhelming majority of trucking," says Chris Spear, ATA president and CEO. "Removing this burden will allow motor carriers to replace their trucks with modern, safer, and cleaner equipment, which will in turn provide a boost to manufacturing jobs."
