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Tax Loophole For New SUV & Pickup Truck Owners

CONs of the SUV Tax Break

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Of those opposed to the new SUV tax break, the following reasons are given for their opposition of such legislation:

  • One outcome of this incentive is that business owners are likely to seek out bigger SUVs instead of cars. For example, an accountant who would do fine with a 30 mpg compact sedan as a company car could be enticed into a big, 15 mpg SUV instead. Or a real estate agent about to buy a 20 mpg midsize SUV that doesn't qualify for the deduction might opt for a full-size SUV instead, because it does qualify.

  • Americans are already buying SUVs in record numbers, so why is there a national need to subsidize sales of the largest light trucks?

  • The tax break would encourage professionals who might have opted for a smaller, more fuel efficient car to purchase a full-size SUV or pick-up truck instead.

  • Thinking that the deal may just be too good to pass up, more people than ever are test-driving SUVs, making them more likely to purchase vehicles that are bigger than than initially thought they wanted or needed.

  • The tax break encourages people from all lines of work, including real-estate agents, lawyers, consultants, and many others to purchase a luxury SUV instead of a luxury automobile, which is not eligible for the same deductions.

  • The tax break applies only to the largest and least fuel-efficient category of SUVs.

  • The law seems counter to national goals of improving vehicle fuel efficiency to reduce U.S. dependence on foreign oil and cut greenhouse gases.

  • Those who purchase fuel-efficient hybrid cars qualify for a tax credit of only a few thousand dollars. For example, those who choose an efficient new gas-electric hybrid car, getting 50 mpg, are rewarded a $4,000 tax deduction.

  • Why is a proposal to extend bigger tax breaks to environmentally friendly vehicles is currently stalled in Congress?

  • If the federal government is in the business of steering consumers toward the purchase of a particular sort of vehicle, then don't environmentalists have a right to a seat at the table alongside the auto industry lobbyists?

  • Business owners are being talked out of buying more fuel-efficient cars over gas-guzzling SUVs. For example, a business owner wanting to buy a Lincoln Town Car would receive a $7,660 deduction, just one-fourth what he might save by buying a Lincoln Navigator. It would take more than 15 years to recoup the entire cost of the car.

  • This is one of those tax credits that’s going to benefit the rich.

  • According to Taxpayers for Common Sense, the SUV tax loophole costs the federal government $1 billion for every 100,000 vehicles that businesses buy.

  • There's no need for the government to subsidize these gas-hogs. Some, like the Hummer H2, only get 10 mpg. A 15 mpg vehicle costs twice as much to operate as a 30 mpg vehicle.

  • New York Governor George Pataki called the loophole unfair and said he would collect state tax on nonagriculture businesses that claimed the federal deduction. (However, this won't work because the SUV deduction is figured in with other business expenses, making it impossible to tell if someone is deducting the cost of a luxury truck.)

  • Senator Barbara Boxer (D-California) is drafting legislation that would change the truck definition to key on a separate cargo area instead of weight, allowing pickups and vans to qualify, but not SUVs. Any SUV weighing 14,000 pounds or less (every SUV on the market today) would be treated like a car.

  • The Sierra Club has urged the IRS to aggressively audit the returns of taxpayers who take advantage of a tax loophole subsidizing their purchases of gas-guzzling SUVs.
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