Congress Agrees to Cut Auto Sale Tax Break

One step forward, two back. We had a pretty good incentive to buy a new car but negotiators on Capital Hill decided to strip off the tax refund for the interest paid on the loan. Bummer. I am old enough to remember the days when you could deduct the interest paid on credit cards. Boy, that was nice and let me tell you I had a nice refund every year!

The legislation will now be written such that a car buyer can only get a credit for taxes paid. This reduces the size of the overall bill somewhat and drastically reduces the amount our Government needed to pay for this perk. What I do not understand is why the lawmakers are concerned about $20 billion dollars or so when the entire package will be $785 billion? These numbers are so staggeringly huge that it really doesn't matter if the stimulus bill is $900 billion or $800 billion. The US has 0 billion so all this money will be created out of thin air and cause inflation.

I digress, so here is the story from Automotive News:

A proposed tax break for new-vehicle buyers is dramatically scaled back in the final version of the economic stimulus bill.

Auto dealers and their allies had sought to make interest on auto loans and the sales and excise taxes on new-vehicle purchases deductible from federal taxes. Proponents say those measures are needed to boost showroom traffic and sales.

But the final stimulus bill -- a compromise between House and Senate negotiators -- makes only sales and excise taxes deductible. The loan interest provision was dropped, a spokeswoman for Sen. Barbara Mikulski confirmed today.

Sources said the trim in the tax break for new-vehicle purchases reduced its cost from about $11 billion to about $2 billion. Congressional negotiators sought to limit the cost of the stimulus bill to pacify lawmakers worried about spending.

Mikulski, D-Md., sponsored the original provision on vehicle purchases at the request of dealers. The spokeswoman said Mikulski considers the deduction for sales and excise taxes an important victory.

Final vote as early as Friday

In a statement Mikulski estimated that a family buying a new car will cut its federal taxes $300 to $600.

The National Automobile Dealers Association first called for the broader tax break last November.

The association maintained today that even the scaled-back tax break promises to boost vehicle sales.

"Anything that can help get consumers back into dealership showrooms can also help stimulate an economic recovery," said David Regan, NADA's vice president of legislative affairs.

The stimulus bill now calls for $789 billion in tax cuts and new spending. The House and Senate could vote to approve the bill as soon as today or tomorrow.

President Barack Obama says the bill is needed to prevent a further collapse of the economy and to create or preserve as many as 4 million jobs.

Wade Newton, a spokesman for the Alliance of Automobile Manufacturers, said today that more must be done to get consumers interested in buying vehicles. He said he expects industry groups to look for other legislation to accomplish that goal.