Restoration of Tax Break Fails in U.S. Senate; Incentive Aided Haulers, Boosted Truck Sales

This story appears in the July 23 print edition of Transport Topics.

The U.S. Senate has rejected a bill that would have restored the bonus depreciation tax deduction for capital spending, a proposal supported by American Trucking Associations.

The bill would have allowed businesses to deduct the entire cost of capital equipment, including trucks and trailers, in the first year the business owns that equipment, instead of spreading it over several years.

The bonus depreciation deduction was first allowed in 2010 as part of the economic stimulus, but it expired at the end of last year. Backed by Democrats, the bill, which was rejected July 12, sought to restore the deduction for one year.

The measure garnered only 53 votes. In the Senate, almost all bills require 60 votes to pass in order to overcome the threat of a filibuster that could prevent a final vote from being completed.

Blaming Republican opposition after the vote failed, Senate Majority Leader Harry Reid (D-Nev.) told reporters, “There is no reason for them to have killed this bill, other than they are trying to hurt President Obama, small businesses and the middle class.”

Sen. Christopher Coons (D-Del.) proposed the bonus depreciation measure earlier this year (4-2, p. 3). Democrats had added to the bill a provision that would have given a 10% tax credit to small businesses that hire additional workers, Reid said.

The House has not held a vote on the bill.

The Senate voted only two days after ATA sent a letter to senators encouraging them to support the bill.

“Due to the recent deep recession, from which our industry, like others, is still recovering, many small motor carriers remain cut off from access to capital needed to expand their businesses and purchase new equipment,” ATA President Bill Graves wrote in the July 10 letter.

“Our carriers are ready to put new capital to work, capital without which they will not be able to accommodate the increased freight movements that a recover-

ing economy will generate,” Graves stated.

The trucking industry is dominated by small businesses, Graves told senators. More than 90% of trucking companies registered in the United States operate fewer than seven trucks, and more than 97% operate fewer than 20 trucks, he said.

The proposal, known as the Small Business Jobs and Tax Relief Act, would have provided a “real stimulus” to trucking, Graves said.

After the bill’s failure, the bonus depreciation provision is unlikely to pass until the end of the year, said Bailey Wood, spokesman for the American Truck Dealers.

“With the legislative gridlock still continuing on Capitol Hill, the likelihood of any tax related legislation, including bonus depreciation, is unlikely until after the election,” he told Transport Topics.

The provision is nonetheless popular, and will likely come back at some point, Wood said.

The same day the Senate rejected the bonus deprecia-

tion measure, it also voted down a competing Republican small-business tax proposal. That bill, which received only 24 votes, would have cut taxes by 20% for businesses with fewer than 500 employees.

The House passed that bill in April, but President Obama had threatened to veto it.

Staff Reporter Michele Fuetsch contributed to this report.