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Bush: I Tax Break for SUVs

A tax break supposedly aimed
at small business owners actually has a loophole big enough to drive a sport utility vehicle through.

President George W. Bush’s proposed economic stimulus plan would increase a tax deduction on light-duty trucks to $75,000, a break that business owners—including doctors, lawyers and accountants—are using to buy sport utility vehicles.

The tax code has been in place since 1996, and was designed to allow small businesses, such as farms and construction companies, a deduction on the purchase of light trucks for use in their businesses. Currently the tax break is $25,000. According to Keith Ashdown, vice president of policy and communication at Taxpayers for Common Sense in Washington D.C., the tax deduction includes a huge loophole.

“What we’ve found was there’s a glitch in the tax code,” said Ashdown, “because SUVs are defined as light trucks, they are able to get this break where, even though they have nothing to do with hauling or any kind of business activity, you’re able to get an immediate $25,000 reduction on your taxes.”

The result, he said, is that many business owners that have no legitimate need for such a hefty automobile are purchasing them. With the new plan, small business owners could deduct the entire price of SUVs like the Hummer H2 or the Lincoln Navigator.

“People have been buying SUVs just because,” Ashdown said. “They didn’t need it. They didn’t really want it. But because it was such a lucrative tax break, they went out and bought them.”

As well as being a tax issue, this loophole is also drawing the attention of environmentalists.

“It provides bigger incentives for buying SUVs as opposed to more efficient cars,” said Christine Vanderlan, energy assistant at Environmental Advocates in Albany.

Gov. George E. Pataki announced plans to compensate for the loophole on the state level. He proposed that nonagricultural businesses that claim federal tax deductions on passenger vehicles add the deduction on their state income, therefore forcing them to pay New York state tax on their federal deduction.

However, Ashdown is skeptical about the governor’s plan.

“When you deduct the SUV break from your taxes,” said Ashdown, “. . . you don’t actually have to say that it’s for an SUV. They don’t keep track of it on a federal level. What he’s [Gov. Pataki] proposing to do, you can’t implement. . . . It’s impossible.”

For many, the onus is now on the Bush administration. “The administration now knows about it, so the proof will be in what they actually do,” said Ashdown.

—John Gallagher


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