WASHINGTON (April 2, 2001)—Truck tire manufacturers and retreaders are at odds over a legislative proposal to simplify the way federal excise taxes on new truck tires are calculated.
The Rubber Manufacturers Association, which wrote an early draft of the bill, claims it will vastly simplify the administrative and physical management requirements of the excise tax for both tire manufacturers and the Internal Revenue Service.
However, the International Tire & Rubber Association, made up largely of retreaders, is skeptical of the proposal.
"We have great concerns over whether this bill is revenue-neutral," said Roy E. Littlefield III, ITRA director of government relations. "If it isn´t—and our preliminary calculations suggest it isn´t—we fear it will come back and hurt the industry."
Since 1982, the IRS has levied federal excise taxes only on heavy-duty new truck tires weighing more than 40 pounds. The current formula is 15 cents for every pound over 40, for tires weighing 40-70 pounds; a flat $4.50, plus 30 cents per pound for every pound over 70, for tires weighing 70-90 pounds; and a flat $10.50, plus 50 cents for every pound over 90, for tires weighing more than 90 pounds.
In the past, new tire makers have sought to replace the excise tax with a weight-distance tax, which bases taxes on miles traveled. Trucking companies and truck tire retreaders, however, are adamantly opposed to a weight-distance tax. Such a tax would greatly increase the amount of taxes paid by truckers, and would also remove an important price differential between new and retreaded truck tires.
Two legislators from Oklahoma—a state with major tire manufacturing facilities—have reintroduced the tax simplification bills they sponsored without success last year. Rep. Wes Watkins, R-Okla., introduced his bill in the House March 6, while Sen. Don Nickles, R-Okla., introduced identical legislation in the Senate March 22.
The Watkins and Nickles bills would change the way the truck tire excise tax is computed, from weight to load-bearing capacity. Each tire would be assessed eight cents of tax for every 10 pounds of load-bearing capacity over 3,500 pounds. For example, if a tire´s capacity is 6,000 pounds, the tax would be eight cents times 2,500 pounds, or $20.
If passed, the bills would greatly simplify the calculation of the tax, while sidestepping a weight-distance tax completely, according to John Serumgard, RMA executive vice president.
They would also reduce enormously the physical effort required for tax calculation. Tire makers must submit their truck tires every year for weighing to calculate the tax, because design or size changes can affect weight, Mr. Serumgard explained.
"Those tire makers who participate in the RMA Average Weight program must submit tires to us every year for weighing," he said. "Adoption of the simplification plan will put us out of business for a system we´ve run since 1934, but we´d be happy to terminate that system under such circumstances.
"We won´t have to redo the tax rates on an annual basis," Mr. Serumgard added.
But ITRA officials believe the simplified system will result in revenue shortfalls and renewed calls for a weight-distance tax.
"We told the RMA we would support the tax simplification plan," said ITRA Executive Director Marvin Bozarth. "But with a tax rate of eight cents, it won´t be revenue-neutral."
For example, an 11R22.5 truck tire, Load Range H, has a load-bearing capacity of 6,610 pounds, Mr. Bozarth said. Under the proposed system, the excise tax on that tire would be $24.88. That compares with a tax rate of $31.75 for the same tire in a highway design, or $35.61 in a lug design.
"We want to see the tax rate set in the simplified system to where the revenue will be closer to current levels," he said.
The bills have been assigned to the Senate Finance and House Ways and Means Committee. No hearings have yet been scheduled.