Tax Incentives for Car Buyers Trimmed in Final Version of Stimulus Package

Under an amendment originally proposed by Sen. Barbara Mikulski (D-Md.), car buyers will be able to deduct the sales and excise taxes on a new-car purchase as long as that vehicle is no more than $49,500.

The Auto Ownership Tax Assistance Amendment is expected to cost $1.7 billion over the next 10 years, which feels like a veritable drop in the bucket compared to the overall size of the bill.

Still, the tax breaks will be worth only $395 to a family making $100,000 in combined income when purchasing a $23,000 vehicle. In Mikulski’s original bill, the savings would have been roughly $1,460 because interest payments would also have been deductible.

Proponents of a larger stimulus have used this as an example of where the recovery package goes wrong — that by watering it down (in this case for car buyers), it won’t have the impact it could and should.

Let us know what you think: Will the tax break push up new-car sales?

Car Buying Stimulus May Not Help (CNNMoney)