Wojciech Sokolowski wrote:
> A co-worker told me that the Bushies are proposing a tax credit for SUV
> buyers. Is it true or is an urban legend?
It's not a tax credit, but a disproportionate deduction scheme. And it only benefits the largest SUV's on the market. The administration wants to increase the annual ceiling on expensing capital items from $25,000 to $75,000 for most businesses and sole proprietorships.
Normally, Section 280F of the Internal Revenue Code proscribes this treatment for automobiles. Presumably to discourage purchase of luxury automobiles for "business purposes," it also limits the annual depreciation on automobiles. But its definition of automobile excludes any vehicle with a gross vehicle weight of over 6,000 pounds. This was fine back in the day when anything that heavy was used on a farm or a gravel pit.
The net effect is that auto dealers are pushing lawyers and doctors to buy their largest, best-appointed SUVs because of the tax deductions. Under the Bush plan, a $103,000 Hummer could generate $87,320 in deductions in year a business placed it in service ($75,000 expensing, plus $8,400 in immediate depreciation thanks to 2002 stimulus bill, plus $3,920 in ordinary 5-year deprecation on the remainder). The tax break would equal the tax avoided on that amount of income.
Don't hold your breath waiting for anyone to fix Section 280F (John Dingell brooks no lesser gods).
--Tim Francis-Wright