Now that we are over halfway into the year, there is a lot to cover such as used tractor sales, gas prices, independent contractor’s fight to remain independent, and taxes. First of all, I would like to announce that the NTA’s (NorthAmerican Transportation Association’s) electronic newsletter, Hi-Way Hi-Lites, as of June 1, 2021, now goes to 1,113,586 motor carriers all across the United States! We are bound and determined to keep truck drivers up to date on what’s going on in the transportation world and, possibly, the state you are in. We now have contributing information coming in from nine law firms all across the United States that help keep us informed so that we can keep you informed.
Let’s start with used tractor sales. The average sales price for a used Class 8 truck sold in April set the all-time record, clearing $57,000, which is 50% higher than a year earlier. The price climbed to $57,431 compared with $38,242 a year earlier, which was the lowest amount for 2020. The previous high was $55,000 set in 2015. According to the experts, it’s going to remain a very strong year for prices.
Get ready for $5.00 gasoline, whether you live in the state of California or not. Before the Colonial Pipeline shutdown, the national average gasoline price had exceeded $3.00 a gallon for only two weeks since 2014. However, in California, gas prices now average $4.18 a gallon – $1.14 more than the national average – and in recent months has increased more than prices nationwide. Why do California drivers pay so much at the pump? Blame a higher-octane blend of taxes and environmental regulations.
California has long imposed higher taxes on gasoline more than all the other states, but in 2017 Democrats in the State Legislature raised the tax on each gallon by an additional 20.8 cents over three years. At the start of this year, California drivers were paying on average 63 cents a gallon in state and local taxes, compared with the 50-state average of 36.8 cents. California’s gasoline taxes are the highest in the country.
The high costs of complying with the state’s low-carbon fuel standard is causing some larger refiners to switch to producing renewable fuels, which have become much more profitable due to regulatory and tax credits. S&P Global Platts data shows that producers of West Coast renewable diesel make on average $5.53 per gallon including regulatory and tax credits – which is nearly three times as much as for regular diesel – while they would lose 27.5 cents a gallon without them. Marathon Petroleum this spring announced plans to convert its large refinery in Martinez, CA to a renewable diesel plant. Phillips 66 plans to overhaul its San Francisco refining complex to produce renewable fuels, including from grease, soybean oil and other cooking fats. The result will be even higher gas prices for California drivers.
Gasoline supply in California is usually tight because out-of-state refineries aren’t configured to produce CARB’s special fuel blend. Many refineries in the state have closed in recent years because of onerous environmental regulations. So, whenever one or two large refineries experience even a temporary outage, prices soar, often up to 60 cents a gallon. And now, with the state losing two large gasoline-blending refineries permanently, drivers in California can soon look forward to paying more than $5.00 a gallon at the pump as the state’s green mandates ratchet up and gas refineries shut down or convert to renewable fuels.
Next, the California Trucking Association (CTA) has asked the 9th U.S. Circuit Court of Appeals for a full appellate court review of a three-member panel’s earlier decision regarding a state law that was rejected on April 28, with many in trucking deeming it unfair to the industry. In its May 26 appeal of that ruling, CTA said that the court should grant a rehearing on the grounds that the earlier decision “conflicts with decisions of the U.S. Supreme Court and of this court and creates an acknowledged conflict with a decision of the U.S. Court of Appeals for the 1st Circuit.”
Some may ask why this is so important if they work in the Midwest or on the East Coast, but if you remember, the Trump Administration issued a federal regulation making it easier for businesses to classify workers as independent contractors. While the Trump regulation listed five factors for consideration, the two given the far greatest weight were the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss based on personal initiative or investment. The final rule issued by the Biden Administration in early May rescinded this regulation. The Department of Labor (DOL) will now handle enforcement efforts on the issue of classifying workers as employees or independent contractors.
In general, the Biden Administration will rely on a long-standing multi-factor test that outlined a seven-factor “economic realities” test. Among other things, there will be an examination of whether the work performed is “an integral part” of the business, and the worker’s “degree of independent business organization and operation.” Don’t forget that if California were a sovereign nation, it would rank as the world’s fifth largest economy, ahead of India and behind Germany. So, it is very important to know, just like a virus, that whatever starts in California will eventually spread across the nation. Biden is trying to push through the PRO Act, and California’s AB5, which attacks independent contractors, is part of this.
As you know, Biden is on a spending spree of your tax dollars. Six trillion is the last figure I heard. One of the big surprises included in the Biden administration’s first budget, released the Friday before Memorial Day weekend, was the confirmation that Biden’s proposed capital gains tax hike would apply retroactively to gains realized prior to any change in tax law. Biden is calling for a near doubling of the federal capital gains tax rate from 23.8% to 43.4% for households with income in excess of $1 million, and his new budget stipulates that the rate increase would apply to gains realized starting in late April. This is just another good reason why independent contractors need to incorporate their business!