SUV tax break to hit $100,000 - "Detroit Free Press" 5/23/2003

[maybe some day...]

SUV tax break to hit $100,000

Small-business gain has been $25,000

May 23, 2003

BY RUBY L. BAILEY
FREE PRESS WASHINGTON STAFF

WASHINGTON -- A loophole that allows small-business owners to deduct $25,000 for luxury sport-utility vehicles will grow to $100,000 under the $350-billion stimulus plan expected to be approved by the Senate today and signed by President George W. Bush on Monday.

The tax break applies to small businesses -- and to individuals who have set up mini-corporations for tax purposes -- when they purchase a vehicle weighing at least 6,000 pounds.

The provision was created in 1996 to prevent farmers and others from being penalized by the 10-percent luxury tax on vehicles costing over $30,000 when they purchased pickup trucks and tractors.

But the move toward bigger SUVs over the years has increased the number of those vehicles that qualify -- whether they are used for work or not.

Thirty-eight SUV models -- including the Cadillac Escalade, Lincoln Navigator, Chevrolet Suburban 2500, Dodge Durango and the Ford Expedition -- qualify.

Bush wanted Congress to increase the existing deduction to $75,000 to encourage immediate spending by small business. The House of Representatives upped the amount to $100,000.

Some in the Senate, including Barbara Boxer, D-Calif., wanted to change the provision's wording to close the loophole.

If the bill is enacted, the tax break will expire in 2005.

Experts are unsure how much of the SUV sales market can be attributed to those purchased because of the loophole.

But Taxpayers for Common Sense, based in Washington, estimates the SUV loophole could cost taxpayers between $840 million and $987 million for every 100,000 vehicles sold to businesses, according to the organization's Web site.

And some point out the irony of having such a large tax break for vehicles that increase U.S dependence on foreign oil and pollute the air.

"It's not restricted to people who use trucks in pursuit of their business," said David Nemtzow, president of the Alliance to Save Energy, a Washington-based bipartisan coalition of business, government and environmental leaders. "We should be having tax breaks for fuel-efficient cars to make them more attractive. We think it's just a rip-off of American taxpayers."

Nemtzow said he has heard of small-business owners saying, "Oh yeah, I went up another size because the salesman pointed out the tax loophole."

But Eron Shosteck, spokesman for the Alliance of Automobile Manufacturers, said most small-business owners purchase SUVs for business purposes. The organization supports rewriting the provision to include SUVs as well as trucks.

"Why should a contractor's vehicle be treated any differently than the power tools he hauls in the back of it?" asked Shosteck. "The way it is currently structured, it discriminates against small-business owners who use cars. You have to give business owners the benefit of the doubt that they are using SUVs for business purposes."

RUBY BAILEY can be reached at 202-383-6036 or bailey@freepress.com.

[maybe some day...]

SUV tax break to hit $100,000

Small-business gain has been $25,000

May 23, 2003

BY RUBY L. BAILEY
FREE PRESS WASHINGTON STAFF

WASHINGTON -- A loophole that allows small-business owners to deduct $25,000 for luxury sport-utility vehicles will grow to $100,000 under the $350-billion stimulus plan expected to be approved by the Senate today and signed by President George W. Bush on Monday.

The tax break applies to small businesses -- and to individuals who have set up mini-corporations for tax purposes -- when they purchase a vehicle weighing at least 6,000 pounds.

The provision was created in 1996 to prevent farmers and others from being penalized by the 10-percent luxury tax on vehicles costing over $30,000 when they purchased pickup trucks and tractors.

But the move toward bigger SUVs over the years has increased the number of those vehicles that qualify -- whether they are used for work or not.

Thirty-eight SUV models -- including the Cadillac Escalade, Lincoln Navigator, Chevrolet Suburban 2500, Dodge Durango and the Ford Expedition -- qualify.

Bush wanted Congress to increase the existing deduction to $75,000 to encourage immediate spending by small business. The House of Representatives upped the amount to $100,000.

Some in the Senate, including Barbara Boxer, D-Calif., wanted to change the provision's wording to close the loophole.

If the bill is enacted, the tax break will expire in 2005.

Experts are unsure how much of the SUV sales market can be attributed to those purchased because of the loophole.

But Taxpayers for Common Sense, based in Washington, estimates the SUV loophole could cost taxpayers between $840 million and $987 million for every 100,000 vehicles sold to businesses, according to the organization's Web site.

And some point out the irony of having such a large tax break for vehicles that increase U.S dependence on foreign oil and pollute the air.

"It's not restricted to people who use trucks in pursuit of their business," said David Nemtzow, president of the Alliance to Save Energy, a Washington-based bipartisan coalition of business, government and environmental leaders. "We should be having tax breaks for fuel-efficient cars to make them more attractive. We think it's just a rip-off of American taxpayers."

Nemtzow said he has heard of small-business owners saying, "Oh yeah, I went up another size because the salesman pointed out the tax loophole."

But Eron Shosteck, spokesman for the Alliance of Automobile Manufacturers, said most small-business owners purchase SUVs for business purposes. The organization supports rewriting the provision to include SUVs as well as trucks.

"Why should a contractor's vehicle be treated any differently than the power tools he hauls in the back of it?" asked Shosteck. "The way it is currently structured, it discriminates against small-business owners who use cars. You have to give business owners the benefit of the doubt that they are using SUVs for business purposes."

RUBY BAILEY can be reached at 202-383-6036 or bailey@freepress.com.