Senate endorses tax breaks for buyers of new cars

The Baltimore Sun

WASHINGTON - With U.S. auto sales falling near a 27-year low, the Senate gave its approval yesterday to a proposal by Sen. Barbara A. Mikulski to provide tax breaks to purchasers of new cars and light trucks.

The Maryland Democrat's measure, which raises the price tag on the Senate's version of the economic stimulus package to almost $900 billion, would apply only to new vehicles purchased this calendar year.

Mikulski said her plan "actually creates jobs" by stimulating employment in car making, sales and service. It would also help the environment, she said, by putting more fuel-efficient new cars on the road.

Opponents objected to the cost of the proposal and warned that it could increase the overall amount of consumer debt, widely blamed as a cause of the current financial crisis.

Senate Finance Chairman Max Baucus, a Montana Democrat who was among those opposed to the measure, said it would cost $11 billion.

Under Mikulski's proposal, buyers of new cars, light trucks or minivans would be allowed to deduct the state sales or excise tax on the purchase of a car, as well as interest payments on the car loan, on their federal income taxes. The provision would apply to families earning up to $250,000 a year or to individuals with incomes up to $125,000.

It would save the buyer of a $25,000 auto in Maryland about $1,500, according to Mikulski's office. On a $35,000 vehicle, the savings would be about $2,500. The tax break would phase out on any vehicle costing more than $49,500.

The provision was approved by voice vote, after the Senate voted 71-26 on a procedural motion to allow the amendment to be added to the stimulus package. Because it is not included in the House version of the measure, it is subject to negotiation by a House-Senate conference committee, assuming the Senate approves the overall stimulus plan.

Democratic Sen. Benjamin L. Cardin of Maryland joined 31 Republicans and 39 Democrats and independents in supporting the proposal.

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