A jobs creation bill approved by Congress contains a provision simplifying the way federal excise tax is calculated on truck tires, basing the tax on load capacity rather than weight.
Michelin North America Inc. proposed the amendment, calling it the culmination of years of discussion among U.S. tire manufacturers. But the Tire Industry Association (TIA)-though saying the simplification will be a boon to its commercial tire and retreader members-is concerned the provision's language on ``super single'' tires may not prove to be revenue-neutral.
The provision is Section 869 of the American Jobs Creation Act of 2004, which passed the Senate 69-17 on Oct. 11 after passing the House the previous week. The bill is designed to create up to 500,000 jobs through $136 billion in tax breaks and hiring incentives. It includes a 3-percent cut in the top corporate tax rate. Section 869 establishes a tax on truck tires at a rate of 9.45 cents for each 10 pounds of load capacity about 3,500 pounds. For bias-ply and super single tires, the tax rate is halved to 4.725 cents.
The provision defines a super single tire as ``a single tire greater than 13 inches in cross section width designed to replace two tires in a dual fitment.'' It also provides a tax exemption for tires sold to the U.S. Defense Department.
Since 1982, tires over 40 pounds have been taxed on a percentage of their weight, the percentage increasing with the weight of the tire.
``This will save a lot of money and time for us-it will be easier to administer than the old system and fairer as well,'' said Steve Evered, Michelin director of government affairs.
TIA Executive Vice President Roy Littlefield sent a letter Oct. 7 to Senate Finance Committee Chairman Charles Grassley, R-Iowa, expressing concern that taxing super single tires at the same rate as bias-ply tires could cause a revenue shortfall.
``We don't think this is a time to experiment with numbers and believe this provision should be pulled and studied more closely,'' Mr. Littlefield wrote.
Becky MacDicken, TIA government relations director, said the simplification will please commercial tire dealers and retreaders, but ``we're going to watch the super single portion of the provision,'' she added. ``If it turns out not to be revenue-neutral, we'll seek to have the matter reopened.''
The provision will go into effect Jan. 1, 2005, Ms. MacDicken said.