by Ken Presley
WASHINGTON—Currently, the United States federal excise tax on diesel is 24.4 cents per gallon. The federal tax was last raised in 1993 and is not indexed to inflation.
Federal fuel taxes
Both gasoline and diesel fuel taxes have been used to fund the Highway Trust Fund since 1956. Originally, the Highway Trust Fund was used exclusively for highway construction and maintenance; however, mass transit was added in 1983.
Since the late 1970s, for-hire over-the-road buses have been generally exempt from taxes of 17 cents per gallon diesel with additional taxes passed afterwards that make up the 7.4 cents. In some instances, operating companies claim the entire exemption for school related travel. (Note: Information regarding these exemptions may be found in IRS publication 510.)
The Highway Trust Fund has been running low or out of money for some time and has been kept in check largely with accounting measures such as pension smoothing, raiding the Federal Reserve’s surplus fund and selling off a portion of the Strategic Petroleum Reserve.
Congress has been reluctant to raise fuel taxes, and many legislators support reducing or eliminating federal funding of roads and highways altogether.
Last month, Rep. Bill Shuster, the retiring Chairman of the House Transportation and Infrastructure Committee, released a “discussion draft” of a bill proposing, among other things, an end to the partial fuel tax exemption for over-the-road buses and mass transit’s full fuel tax exemption. Additionally, the draft proposed a 20-cent increase in the diesel tax. The exemption for fuel used in traditional school bus use is preserved in the proposal.
It is unlikely switching to electric would afford relief as the draft proposes an excise tax of 10 percent on the wholesale price of electric batteries used to propel motor vehicles. Even bicycle tires would see a 10 percent tax.
Elimination of the fuel tax exemption for over-the-road buses, in combination with the proposed 20-cents increase, would result in a 600 percent increase in fuel cost for the average motorcoach operating company.
The United Motorcoach Association (UMA) responded promptly stating, “Frankly, we believe the benefits of connecting communities and people to jobs, education, healthcare and tourism by motorcoach justifies continuing that policy as the fuel-tax exemption is used in a manner that requires no public funding to connect these communities. We urge you to continue this sound rationale by returning to a zero-based fuel-tax for over-the-road buses as the proposal moves through the process.”
As discussions move forward, UMA will advocate that Congress should return to no federal fuel tax on diesel used in over-the-road buses and maintain parity with public transits. Watch for continued updates and how you can help advocate, including participation in the UMA Capitol Hill Day fly-in. In the meantime, we urge you to work to stop these increases.
