I'm not sure I'd call this a loophole. Maybe some history would help? A study found that the vast number of taxpayers who take a deduction for "business use of a car" were abusing the deduction (this is also true of meals and entertainment, which is why it got phased out): mostly it was small business owners who bought a family car with business funds. This kind of thing is nearly impossible to enforce (and not very productive, revenue-wise), so a change was made to make this deduction less "interesting" for the medium-small guy: the 5 year recovery period for _cars_ was changed to have a cap on the total deduction that could be claimed, effectively lengthening the recovery period (and making the car more "expensive" and thus less tempting to cheat on). This was clever: a $12,000 pickup truck for a small delivery service can probably still be fully recovered in 5 years, but a $40,000 Lexis cannot.
So what's a "car" ...? Well, they had to cut it off somewhere, and at the time, 6,000lbs seemed to be high enough to catch most of the abusers. Clearly Detroit is was too smart for that and the size of these huge SUVs has crept up, with a wink and a nod.
BUT: the price of these behemoths truely outstrips any "benefit" one
gets from tax relief. With starting prices for the H2 around $45k, you
can see that spending a buck to save a buck is a dubious reward. And
frankly, I'd rather see GDP go up than tax revenues. And don't forget:
if they are lucky, they'll sell 40,000 of them this year ... really a
drop in the bucket (and potentially a good source of targeted audits
:-).
(The additional 30% depreciation gift really doesn't belong in this conversation anyway, since it applies equally to all investment.)
> I wanted to point out that the tax breaks for "small business" often
> go to other than the nation's entrepreneurs.
The vast majority of businesses in the US are "small" so I'm not sure what the distinction you're drawing here is. As for me, I'm all for these idiots buying H2s (I wish they'd buy more H1s, at twice the price) because the sooner they are parted with their money, the better off the rest of us will be.
If you are angry about the deduction, lobby for higher corporate rates, not for the repeal of special-interest tinkerings: changes in recovery periods are generally revenue neutral in the long run.
/jordan