Editorial: Tax Reform - It’s the Right Thing to Do

There’s a lot to like about what’s going on in Washington, D.C., for a change, as lawmakers from both major parties and President Donald Trump begin to talk seriously about tax reform.

Two tax plans have been released, one from the Trump administration and the other from House Republicans. Both would slash rates on corporate profits and on earnings that are passed through to individual owners, limit deductions and eliminate the alternative minimum tax and estate tax.

Lower tax rates would put more money in the pockets of corporations and business owners, but it also would trigger more investment in drivers, equipment, safety technologies and improvements in productivity, according to American Trucking Associations.

“Tax reform is very important to us,” ATA President Chris Spear said in a recent commentary. “Relief is long overdue, and we are encouraged that Congress and the president have prioritized major tax reform for the first time in three decades.”

Trucking pays more in taxes than most other industries, according to a study by Aswarth Damodaran, a professor of finance at the Stern School of Business at New York University. The report showed the aggregate effective tax rate for a group of 30 publicly owned trucking companies to be 37.28%. That compares with a tax rate of 28.49% for the total market.

The rate for a group of seven railroads (35.87%) also is higher than the market average, while the effective tax rate for auto and truck makers is among the lowest of all industries at 9.1%.

In pursuing tax reform, it will be important not to change at least one aspect of the current tax code, according to Spear.

Section 1031 of the Internal Revenue Code allows businesses to replace capital goods with like-kind property without recognizing capital gains, an arrangement that allows carriers to purchase newer and safer equipment and invest in critical facility improvements, according to ATA.

Another helpful change would be to eliminate the federal excise tax on new trucks and trailers, and replace that lost revenue with an increase in the federal tax on diesel fuel.

However it is done, we applaud the effort that is being made to reduce taxes and to do it in a bipartisan fashion, which is the only way, frankly, that it can get done.

It’s the right thing to do, and now is the time to do it.