Mikulski tax break stays

The Baltimore Sun

WASHINGTON -The $789.5 billion economic stimulus package that President Barack Obama is expected to sign next week will contain a slimmed-down version of a new- car tax break proposed by Democratic Sen. Barbara A. Mikulski of Maryland.

Under the stimulus deal that Congress is likely to approve over the next few days, buyers of new cars, light trucks, recreational vehicles and motorcycles will be able to deduct the state sales and excise taxes from the purchase on their federal returns next year.

"Everyone wants to save auto manufacturers, but no matter how much government aid we give to the Big Three automakers, they can't survive if consumers don't start buying cars. My proposal stimulates demand in the automobile industry so that people go to showrooms and buy cars. At the same time, it lends a helping hand to struggling families who need to buy a car to get to work and take their kids to school," Mikulski said in a prepared statement.

The tax break, which will cost an estimated $1.7 billion over 10 years, no longer includes her proposed deductions for interest payments on car loans.

The initial version of her plan carried an $11 billion price tag, but the initiative was reduced in scope as part of a broader effort to lower the price tag on the stimulus package and provide more money for infrastructure spending and education.

Mikulski scored a major legislative victory by getting her provision into the final deal at all. It was one of only two so-called rifle-shot tax breaks supported by industry lobbies and approved by the Senate; the other was for homebuyers.

According to Mikulski's office, a family that takes advantage of the new-car tax break will pay between $300 and $600 less in federal taxes next year. Families earning up to $250,000 a year and individuals who earn up to $125,000 are eligible for the tax break.

It is an "above-the-line" deduction, which means it can be taken by anyone who owes federal income tax. The break applies only to the first $49,500 of the vehicle's purchase price.

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