11/25/2008Congressman Wants Bailout for Car Buyers
Instead of a corporate bailout for Detroit, congressman proposes tax cuts for new car buyers.
A member of the U.S. House of Representatives believes the best way to provide relief to the beleaguered automobile industry is to stimulate demand with tax incentives for new car buyers. Representative Doug Lamborn (R-Colorado) on Thursday introduced a bill, HR 7298, that would allow motorists to deduct a portion of the purchase price of domestic vehicles on their income taxes. It would also raise expensing limits commonly used by small businesses to buy SUVs and trucks.
"HR 7298 would give a free market approach to addressing part of the auto industry's problems," Lamborn wrote in a letter to colleagues on Thursday. "Automakers aren't selling cars. Instead of writing them a check, my bill could help them move inventory."
Edmunds.com yesterday forecast that new car sales for November were down 28 percent from 2007, with Chrysler and Ford reporting an even greater drop. Lamborn proposes a short-term boost to these sales by creating a $10,000 tax deduction for new car buyers. Motorists would only be able to apply the deduction to the purchase of cars that are for personal use and "the final assembly of which is in the United States by a manufacturer." The incentive would expire at the end of 2010.
The proposal also doubles and makes permanent the expensing limits for the Section 179 tax deduction, which Lamborn sees as a significant benefit for car dealers. Under existing law, businesses can deduct up to $250,000 in capital goods purchases from their taxes in the year of purchase, with a phase-out at $800,000. The legislation increases the amounts to $500,000 and $1 million, respectively. Without the bill, the deduction drops to $125,000 in 2010 when many of the Bush tax cuts are set to expire.
Representatives Ron Paul (R-Texas) and Virginia Foxx (R-North Carolina) joined as original co-sponsors of the legislation, a copy of which is available in a 45k PDF file at the source link below.