‘There Are No More Extensions’

By Joe Rajkovacz – Governmental Affairs – Western Trucking Alliance

I like to use this column to write somewhat humorous takes on the trucking industry. I don’t really know if this story falls under funny, stupid, or that famous trucker phrase, “Hey, you ain’t going to believe this s#!t.” If you listen to Sirius XM Satellite Radio, lately they have been running an infomercial for the California Air Resources Board featuring none other than Lisa Kelly of Ice Road Truckers fame.

I heard the ad for the first time while I was on hold during a commercial break as a guest on the Road Dog channel with Mark Willis. Ironically, I was explaining to a national audience all the proposed new amendments to the Statewide Truck and Bus regulation and along comes this CARB infomercial supposedly intended to heighten trucker awareness, nationally, of their rules.

Besides chuckling about the absurdity of discussing CARB’s amendments when the very agency I’m talking about runs a PR infomercial, I wondered where the money came from to buy the ad spot(s). The ad blitz was probably paid for with cash raised from CARB’s Cap & Steal Trade scheme but the (almost) show stopping quote came from the last scripted statement of Ms. Kelly when she said, “There are no more extensions.” Really? That was all we were talking about; newly proposed extensions.

There is so much irony in using Ms. Kelly as a CARB spokesperson especially when you stop to think about where she got her trucking fame and the whole point of what Ice Road Truckers is about: driving a truck in treacherous winter conditions. While enviros preach nothing but doom and gloom from global warming (or climate change), the History Channel doesn’t seem to be ready to cancel the show for lack of – ice! While I was writing this column on the last day of March (springtime for most of the U.S.) a normal spring blizzard was working its way across the northern Great Plains and Prudhoe Bay, Alaska had a low of minus 10 and the forecast was for a balmy minus 16 later in the week.

Just in case you are even remotely inclined to believe the doom and gloom crowd claiming the 4th lowest amount of ice in the Arctic (because of your diesel emission spewing truck), the Arctic is actually still totally froze over. In the numbers game played by enviros they count ice formation well into the Pacific and Atlantic Oceans, not just the Arctic and that did come up a “wee bit short” this year. The actual Arctic is still totally frozen over so Lisa and all the other drivers on IRT can drive right on top of the ocean delivering the tools of global destruction – oil drilling supplies.

IRS Changes Guidelines for FET on Gliders

If you are one of the growing numbers of truckers who have thought about purchasing a glider kit to recycle your existing drive train and still have the “new truck feel,” the IRS might have just put a crimp in your plans by adding a 12 percent tax to the whole deal.

One of the attractions to purchasing a glider kit has always been avoiding the 12 percent Federal Excise Tax. Not anymore. In January the Office of Chief Counsel, Internal Revenue Service issued a memorandum regarding what they term “chassis renovation” and the tax implications. The bottom line: the IRS appears to be taking a much more aggressive position that most glider kit trucks are a significantly “newly manufactured” vehicle. The memorandum is a huge departure from how the IRS has previously viewed glider kit construction.

Glider kits have been around for years but in recent years have experienced resurgence in popularity primarily as a way to avoid newly mandated environmental standards on new trucks. Truckers have actually been able to order glider kits with factory pre-2007 emission remanufactured engines – even from Caterpillar – already installed in the chassis. You can still choose the glider kit route even when you have a wrecked truck and want to salvage the power train but word to the wise: better check-out the tax consequences with your accountant.

Speaking of the FET on New Trucks

There has been some discussion in Washington D.C. among some groups about reducing or eliminating the FET altogether. Before you get too excited, the idea is “revenue neutral” and could actually increase revenue into the federal coffers. Think of the FET on new trucks, trailers, and tires (plus accessories installed on newly purchase equipment) as identical to past luxury taxes assessed on those buying expensive boats. The luxury tax was actually responsible for killing thousands of manufacturing jobs in the U.S. as potential luxury boat owners decided not to buy yachts built in the U.S. and many think today’s FET is acting in the same way.
The argument against the FET being assessed on new trucks is somewhat similar. If the tax were removed, it is thought it would significantly increase the sales of new trucks simply by reducing their cost by anywhere between $12,000 and $24,000 (not including the cost of financing that tax over a 60-72 month truck loan). Supporters also believe by eliminating the tax it would accelerate the adoption of newer, cleaner emissions technology, and increase manufacturing employment in the U.S. funneling even more tax revenue into Uncle Sam’s pocket from employment taxes.

How would eliminating the FET be revenue neutral? The idea would be to increase the federal fuel tax – probably in the neighborhood of a nickel per gallon, but it could be more. That part of the equation upsets some buyers of used trucks because they think it is a form of cost shifting from new truck buyers (predominately large carriers) to the rest of the industry. However, the other side argues that by eliminating the FET on new trucks sales, it will reduce the cost to buyers of those used trucks when they are resold in secondary markets. They also believe that most truckers can get cost recovery of any increase in fuel tax through standardized fuel surcharging mechanisms in-place with most motor carriers today.

This idea is classic supply-side economic theory. Lower the barrier to production of goods; in this case taxes and people will buy trucks and trailers in much greater numbers. That will create more jobs and generate significantly more tax revenue flowing Washington compared with what the current tax is generating and here is the kick: all of the new tax revenue would flow into the soon to be bankrupt Highway Trust Fund. This all makes perfect sense to me which is probably why it’ll never happen.