Senate Approves Tax Breaks For Car Buyers

by Mike Godfrey, Tax-News.com, Washington

06 February 2009

An amendment to the American Recovery and Reinvestment Act giving tax relief to new car buyers has been approved by the United States Senate.

The Auto Assistance Ownership Amendment, introduced by Sen. Barbara A. Mikulski, a Maryland Democrat, creates a deduction for interest payments on car loans and payments of state sales or excise tax for new cars purchased between November 12, 2008 and December 31, 2009. It was approved by the Senate on February 3.

“My amendment is simple," explained Mikulski in prepared remarks for delivery on the Senate floor, "If you buy a new passenger car, minivan, or light truck by December 31 of 2009, you will get a tax deduction for your sales or excise tax and the interest on your loan. A family would save about USD1,500 on a USD25,000 car, not counting the additional incentives from dealers."

“My amendment also helps state governments," she added. "States rely on tax revenue from new car sales. In my home state and many other states the sales tax is around 6%, so on a USD25,000 car the state gets USD1,500 in revenue. New car sales are down millions per year from their averages. This means states are losing billions when they already are struggling. My amendment will help because as people buy new cars states’ tax revenues will increase."

Co-sponsors of the amendment include: Senator Sam Brownback (R-Kan.), Senator Debbie Stabenow (D-Mich.), Senator Kay Bailey Hutchison (R- TX.), Senator Jim Webb (D-Va.), Senator Sherrod Brown (D-Ohio), Senator Robert F. Bennett (R-Utah) and Senator Evan Bayh (D-Ind.).

The next step in the legislative process for the Mikulski Amendment is Senate approval of the American Recovery and Reinvestment Act. The bill then goes to conference, where differences in the House and Senate versions will be resolved before the legislation is sent to President Obama for his signature.

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