Senate Votes for Tax Credit For Auto Loan Interest
By Brendan Moore
The US Senate voted yesterday to make the interest on auto loans tax-deductible. By a vote of 71 – 26, and by voice vote, the Senate approved temporarily allowing most buyers of passenger vehicles to deduct interest on auto loans AND the sales tax at time of purchase.
The estimate of cost to the overall taxpayer base is calculated to be $11 billion USD, and that will raise the cost of overall stimulus package that is being currently proposed to over $900 billion.
You may have noted the use of the words “temporary” and “most buyers” in the first paragraph when describing the amendment langauge. The tax breaks are only available to those who purchase(d) new passenger vehicles between November 12, 2008, and the end of 2009 that cost less than $49,500. And, families with a household income of $250,000 or more are not eligible for the tax credit the way the current amendment is written.
The retroactive eligibility will appeal to everyone except the people that bought their new car or truck on November 11.
The NADA (National Automobile Dealers Association) pushed hard for the provision and seemed to be very happy with the outcome in the Senate. The House did not include the provision in the stimulus bill they passed and sent to the Senate earlier, but it is believed that the provision stands a good chance of being approved by the House as well. The NADA forecasts that the measure will save the average consumer around $1500 on a $25,000 vehicle purchase.
Senator Barbara Mikulski, one of the ardent sponsors of the amendment, stated. “Everyone wants to save auto manufacturers but no matter how much government aid we give to the Big Three automakers, they can’t survive if consumers don’t start buying cars. We can help by getting the consumer into the showroom.” Mikulski also cited the same figures provided by the NADA regarding how much the average consumer would save on a vehicle purchase.
Many people in the auto manufacturing and auto retail sector were critical of the NADA push, saying the tax credit was not large enough or immediate enough to be meaningful in terms of increasing sales volume.
An NADA spokesman rebuffed that criticism, saying they got as much of a sales incentive as was reasonable in the current political climate.
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