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Published on April 13, 1998

TAX REPEAL REVEALS INDUSTRY SPLIT

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Commercial dealers could have a tough time deciding what is right when it comes to repealing or keeping the federal excise tax on new truck tires. On one hand, removing the tax—which applies only to new tires and not retreads—will level the playing field between the two. But since most commercial tire dealerships make and sell retreads, deciding whether to support or oppose the tax recall isn't easy.

The House of Representatives' highway spending bill includes the provision to eliminate the tax 18 months from now. The Senate's companion bill does not. A joint conference will resolve the differences in the bills, determining the fate of the tax repeal in the process.

Meanwhile, industry groups, including the two largest dealer associations, are lining up on opposite sides, creating a potential rift that could outlast the controversy itself. Industry leaders should keep this in mind.

Whether repealing the tax is or isn't in each group's interest is anything but clear-cut, even for the International Tire and Rubber Association, formerly known as the American Retreaders Association.

No longer solely a retreaders' group, the ITRA defines itself as a commercial transportation association including new and retread tire companies.

Even so, the ITRA said it will fight the tax repeal, contending it would leave retreads less competitive and open the door to cheap imported caps and casings now subject to the tax.

Meanwhile, the Tire Association of North America, formerly the National Tire Dealers & Retreaders Association, is taking the opposite position.

Sixteen years ago that group persuaded Congress to drop the tax on retread rubber while retaining it on new tires weighing 40 or more pounds.

That tax break gave retreads a competitive advantage and is one reason their annual output now exceeds that of new tires.

But TANA's membership, too, has changed since its historic 1982 legislative victory. Today, its members are mostly retailers plus a few tire manufacturers. So TANA, like the Rubber Manufacturers Association, favors repealing the tax.

In fairness, compelling arguments can be made for and against the tax, which adds about $25 to the cost of a typical 11R22.5 truck tire.

Retaining it will encourage the purchase of retreads, thereby conserving energy and materials rather than adding more tires to the nation's scrap pile.

However, repealing the tax not only would save buyers money but also free the industry from having to collect it.

When all is said and done, the outcome may be determined by forces and issues outside the tire industry. Washington insiders say the tire tax merely is a pawn in a legislative struggle over ethanol subsidies.

What a shame if this important issue is decided on such a basis.

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