The excise tax on tires was first levied in 1918 mainly because of revenue needs brought about by World War I. The tax was reduced after the war, and then repealed in 1926. The levy was reintroduced during the Great Depression at a time when federal individual income tax revenues were plummeting, and was increased to help finance World War II. A general reduction in rates was in the offing just before the outbreak of the Korean conflict but revenue needs brought about by that war prevented the lowering of rates. More recent history shows that in 1956 the rate of the tax was raised in response to legislation enacted to build the interstate highway system and to create the Highway Trust Fund. Scheduled reductions did not occur after the construction of the interstate highway system had been extended. A goal of the Surface Transportation Assistance Act of 1982 was to redistribute highway costs between car and truck users. At that time, the tax structure was changed so that the tax was imposed only on heavy tires with tax rates that are graduated, and increased along with the tire's weight. The Taxpayer Relief Act of 1997 repealed the exclusion of the value of the tires from the 12% retail excise tax on heavy highway trucks, trailers, and tractors, but provided a credit offset to the retail tax for the tire tax paid. Under the American Jobs Creation Act of 2004 the tax based on tire weight was replaced with rates based on the load capacity of the tire. The federal excise tax imposed on tires is now scheduled to expire on October 1, 2011. Today, the premise for the excise tax on tires is that heavier vehicles cause greater damage to both roadways and bridges, and that the excise tax on tires resembles a pricing mechanism that is a proxy for highway wear-and-tear charges. This premise still holds true as load capacity must exceed 3,500 pounds before the tax is imposed, thus exempting tires on lighter vehicles. Tire excise taxes still produce revenues for the Highway Trust Fund and repeal of the existing tax would require additional taxes to be imposed on other sources so as to provide an equivalent amount of revenues to build and maintain roadways. This excise tax is said to be easy to administer with minimal federal collection costs. Several arguments are advanced against the imposition of the tire tax. First, some view this selective excise tax as discriminating against the tire and related industries whose products are taxed and also the trucking industry, which depends on the product. The commercial truck transportation industry pays this tax while competitors such as railroads and waterways have no corresponding excise tax, thus creating an intermodal equity issue. Second, to the extent that the excise tax on tires is passed forward into the cost of goods sold, it places a burden on lower income individuals since individuals with lower incomes, relative to those with higher incomes, tend to spend a larger portion of their income for the same consumption amount (thus, to the extent that the tax is passed forward to consumers, the tax is regressive). The authors intend to update this report in the future to reflect legislative changes and collection figures.