Tax cuts for car buyers

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sunson's picture
sunson
Status: Bronze Member (Offline)
Joined: Jan 29 2009
Posts: 42
Tax cuts for car buyers

Tax cut for US car buyers



Quote:

WASHINGTON - THE Senate voted on Tuesday to give a tax break to new car
buyers, setting aside bipartisan concerns over the size of an economic
stimulus bill with a price tag approaching US$900 billion (S$1.36
trillion).

The 71-26 vote came as President Barack Obama said he lies awake
nights worrying about the economy, and signaled opposition to
congressional attempts to insert 'buy American' provisions into the
legislation for fear it would spark a trade war.

Senator Barbara Mikulski led the successful effort to allow
many car buyers to claim an income tax deduction for sales taxes paid
on new autos and interest payments on car loans.

She said the plan would aid the beleaguered automobile
industry as well as create jobs at a time the economy is losing them at
a rapid rate. 'I believe we can help by getting the consumer into the
showroom,' she said.

The provision was attached to the economic stimulus bill at
the heart of Mr Obama's economic recovery plan and is subject to change
or even elimination as the measure makes its way toward final passage.

Democratic leaders have pledged to have the bill ready for his
signature by mid-month, and in a round of network television
interviews, the president underscored the urgency. He told CNN that
even three months ago, most economists would not have predicted the
economy was 'in as bad of a situation as we are in right now'.

He also spoke out against efforts to require the use of
domestic steel in construction projects envisioned in the bill, telling
Fox News, 'we can't send a protectionist message'.

The stimulus bill remains a work in progress, following last
week's party-line vote in the House and an Oval Office meeting on
Monday in which Obama and Democratic leaders discussed ways to reach
across party lines.

Ms Mikulski's office put the cost of the tax break she
sponsored at US$11 billion over 10 years. It would apply to the first
US$49,500 in the price of a new car purchased between last Nov 12 and
Dec 31, 2009. Individuals with incomes of up to US$125,000 and couples
earnings as much as US$250,000 could qualify, including those who do
not itemise their deductions. A couple would save an estimated US$1,553
on a new US$25,000 car, aides said.

Republicans are expected to seek a vote later in the week on a
plan to inject the government into the mortgage industry in an attempt
to drive down the cost of mortgages to as low as 4 per cent.

Democrats treaded carefully on the proposal, saying they
would consider it but also claiming the US$300 billion Republicans
allocated would not come close to accommodating the demand. -- AP

Chris is right. "Status quo will be maintained at all costs".

Nassim Nicholas Taleb is a genius - Predicting economy cannot be done without considering "external" factors and there are just way too many external factors to consider before declaring a move 'safe'.What about the increase in oil demand after this? What about increase in oil prices?

*shakes head*

 

Michael Höhne's picture
Michael Höhne
Status: Silver Member (Offline)
Joined: Nov 16 2008
Posts: 119
Re: Tax cuts for car buyers

Germany did the same. People scrapping their old car, which has to be at least 9 years old and licensed to the owner for at least one year, receive a bonus of 2500 Euros when buying a new car or a car that is not older than one year and wasn't licensed to an individual before or if they are leasing a new car. It's crazy from an environmental view.

The German government allocated 1.5 billion Euros (600,000 x 2,500) and it will be spent on a first-come first-serve basis. It seems that this indeed caused many people to buy new cars, especially smaller ones. There is no restriction regarding the manufacturer, meaning you don't have to buy a German car to get the money.

I wonder what's next though. Get 100 Euros when buying a new computer? Get another 20 when having dinner in a restaurant instead of cooking yourself? We already will receive a one-time payment of 100 Euros for every child. We don't have to apply for it, it will just be transferred to our bank account.

RussB's picture
RussB
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 101
Re: Tax cuts for car buyers

People should look at this as another attempt to shackle us to the status quo.

Enemies of rational energy and emissions policies as they apply to cars often argue in effect that the fleet will take so long to turn over that there's no point in reform.

And now here they are doing their best to accelerate fleet turnover right now in order to lock in a brand new generation of vehicles which are obsolete from the energy and emissions point of view.

The goal is to forestall efficiency, renewable energy, and carbon policies for long enough that it will be too late to effectively enact them.

Of course, that's also the underlying goal of the broader attempt to keep the obsolete American auto industry on life support.

The goal everywhere is to prop up the status quo right down to the last possible minute and last possible cent of profit. The fact that this guarantees the crash which will follow will be all the more precipitous is fine with them, since they expect to be able to ride it out in a fortress their stolen wealth has built. I call it the bunker strategy, and they're getting away with it so far, all the way down the line.

They're burying us alive.

bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 7 2008
Posts: 153
Re: Tax cuts for car buyers
Michael Höhne wrote:

I wonder what's next though. Get 100 Euros when buying a new computer? Get another 20 when having dinner in a restaurant instead of cooking yourself? We already will receive a one-time payment of 100 Euros for every child. We don't have to apply for it, it will just be transferred to our bank account.

Good point.  If this gets people buying cars then this means is the real problem is that prices are currently too high.  The gov't must allow prices, including wages, to fall to clear the market and allow it to stabilize at the correct price level.  When gov't subsidizes these purchases where does the money come from? Take from the left pocket and put it in the right?  Do they collect taxes from the many to give to the few to subsidize their car purchases?  I don't want my savings going to help pay for someone elses car.  If the money comes from the printing press then that's counterfit.  It's stealing my wealth by diluting the purchasing power of my savings.

These schemes will solve nothing.

Crazy politicians.....

fujisan's picture
fujisan
Status: Gold Member (Offline)
Joined: Nov 5 2008
Posts: 296
Re: Tax cuts for car buyers

Same thing in France, but 1000 Euros for cars > 7 years (if I recall well). They already did such temporary bonus twice in the past and it proved to have absolutly no effect in the long term since it's only temporary. Indeed, when such a temporary stimulus is annonced, those willing to buy will wait until it starts; and some will anticipate their purchase before it ends. But it does not create any more demand. That's just wasted money given to a few opportunists. We have a similar temporary stimulus in Belgium: a VAT (retail tax) cuts from 21% to 6% for new houses. Absolutly ridiculous.

I'd have prefered a stimulus to demolish cars and swap to bicycle or get a free public transportation season tiket as long as you don't have a car.

mikese's picture
mikese
Status: Member (Offline)
Joined: Mar 23 2009
Posts: 4
Re: Tax cuts for car buyers

They should give tax cuts to the auto transport companies who can convert to bio fuels or cut their emissions down.

AlexzanderL's picture
AlexzanderL (not verified)
Re: Tax cuts for car buyers

What other things you know that would cause as much tax as they're giving to car buyers, I wouldn't doubt it, its one of the most expensive taxes. Car buyers have become fewer over the last year or so, as available credit for things such as cars and other big ticket items such as boats and houses and so forth has dropped off the face of the earth.  Car buyers are faced with a scarcity of credit, but a surplus of vehicles.  Coming up with a down payment is one of the harder parts of securing financing, and some people usually trade in as their down payments.  Some people are diligent and determined enough to come up with a cash down payment on the loan for their new auto, and some car buyers are using installment loans for just that purpose.

yoshhash's picture
yoshhash
Status: Martenson Brigade Member (Offline)
Joined: Sep 20 2008
Posts: 271
cash for fridges

While I think that "stimulus" mentality and bailouts are starting to be a problem in themselves, at least there is the hope that there can be some intelligence to go along with it:

They are calling this the "next stimulus package"- cash for clunker fridges.

http://www.businessweek.com/bwdaily/dnflash/content/aug2009/db20090821_3...

This one actually makes sense.  Money to buy new cars was a poorly planned, knee jerk reaction which could have had more merit if it had more strings attached.  We all need to keep our food cold (ie- there is nothing frivolous about it), and fridges are the biggest energy hogs in most homes.

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