In the United States, from an accountant’s viewpoint, which makes a better new pizza deliveryvehicle for a small business: a Chevy Volt or a Chevy Tahoe?
The Volt MSRP is $39,145, the Tahoe $39,080.
The Volt costs approximately 6 cents of energy per mile to run; the big SUV 25 cents a mile (EPA 98 MPG vs. 15 MPG city).
Although both are GM products, the Volt has a better warranty and is also proving to be much cheaper on maintenance, requiring far fewer oil changes per miles driven than the big V8-powered SUV.
As a bonus the Volt is eligible for a Bush-era EV tax credit of $7,500.
You might think that the answer is shaping up to be a no brainer in favor of the Volt. The Volt is cheaper to buy, and is 1/5 the cost to run. It is also better suited to an urban environment, and as a bonus gives any business an instant environmentally friendly image.
But thanks to the often loopy U.S. tax code, specifically section 179, depending on your small business need for an immediate tax write-down, the SUV is the clear winner. This is because under section 179 you can write off $25,000 for the Tahoe versus only $11,060 for the Volt in the first year.
This is due to the U.S. tax codes massive incentive to small businesses to buy a vehicleweighting more than 6,000 pounds. Weight is the deciding factor. The Volt weights 2,220 pounds below this arbitrary limit; the Tahoe a few pounds above the limit. This incentive makes the SUV the accountants pick by a country mile ($6,000).
Several years ago, when this incentive was north of $75,000, Section 179 was often referred to as the “SUV Tax Loophole” or the “Hummer Deduction.” Many small business owners used this tax code to completely write-off the purchase of qualifying vehicles at the time (like Hummers). That’s TEN TIMES the current EV tax Credit of $7,500. Worse it encouraged businesses to buy grossly inefficient high running cost gas guzzling monsters like the Hummer. During the last few years that particular benefit of Section 179 has been reduced, but still sits at $25,000. (See “Vehicles & Section 179″ for current limits on business vehicles ).
For a list of other popular vehicles whose sales are still buoyed (some might say solely) by the section 179 tax break see Section129.org.
Some of the vehicles eligible for this tax break have greater sales each month than all current 2012 electric vehicles sales combined.
Having dueling incentives, one encouraging small business to hobble themselves with an inefficient heavy SUV, the other encouraging the purchase of a new efficient Electric Vehicle reveals a schizophrenic U.S. tax system. It is also a business incentive system that is heavily biased against fuel efficiency.
This bias is out of step with a fragile U.S. economy struggling under the burden of expensive foreign oil imports and an inefficient transportation system. Providing an incentive for business’s to purchase a new gas guzzling SUV over an EV that could do the same job isn’t just loopy, it’s counter to current U.S. energy policy.
Some small business owner are buying Volts anyway. Their business strategy appears to be to purchase a Volt personally and then charge back “Business miles” driven. The IRS lets you deduct business miles driven in your personal car, at a rate of 55 cents per mile. That figure is based on inefficient gas-guzzlers, so it can really work to the Volt owner’s advantage.
Assuming that it is too costly politically to take a meat clever to the section 179 sacred cow, one solution could be to synchronizing and equalize these dueling incentives. This could be done by providing an exception to the 6,000-pound minimum weight limit if the vehicle in question meets the same eligibility requirements for the EV tax credit. An added benefit could be the reduction in the EV tax credit payouts by restricting it to consumers only. This would both level the incentive playing field for small business vehicles, and save the U.S. taxpayer some money.
Its impact on EV sales, especially the pack-leading Volt, could be dramatic. Capturing even a fraction of the current section 179 incentivized sales could triple current EV sales.
Allowing the same tax deductions for a business purchasing a Volt that is allowed for a business purchasing a Tahoe, Silverado, or a Mercedes SUV is also good for long-term business efficiency and overall American economic competitiveness.
Until the political will can be found to simplify the U.S. tax code, there is something GM can do today. GM could dramatically improve Volt sales to small businesses by adding 2,220 pounds of lead lining (26 88-pound lead bricks) to the Volt. This would make it weight more than 6,000 pounds and allow the Volt to qualify for the section 179 maximum $25,000 write down. They can market it as a business option add on for the currently radioactive small business environment. I recommend calling it the section 8 option, or Volt S8 for short.
Source: GM-Volt.com
Posts
No comments:
Post a Comment