The media and blogosphere have been busy tearing part President Obama’s plan to shake up the auto industry, but one detail that isn’t getting enough attention is the deductibility of sales and excise taxes on new cars:
“Third, the IRS is launching a campaign to alert consumers of a new tax benefit for auto purchases made between February 16th and the end of this year -- if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. And this provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.”
It will take an awful lot of work to shore up automotive sales, but I’m not sure that a minor tax break will move cars off dealers’ lots. After all, look at how cheap cars are already:
And in the real world outside of statistics, one must question of anyone on Obama’s team has visited a car lot in the past few years. It is incredibly easy to get a good deal on a new car.
What isn’t easy, however, is getting an affordable loan. Comerica Chief Economist Dana Johnson recently said the following:
“The underlying data show quite clearly that car buyers are facing stringent financing conditions,” said Dana Johnson, Chief Economist at Comerica Bank. “In the latest quarter, car buyers had to put down bigger down payments, pay higher interest rates, and limit the maturity of their loans.”
And there’s that other elephant in the room – the economy. People are freaked. Their 401/K’s have been decimated, their home value is down, and job security is a thing of the past. You’re not going to get 100,000 people to buy new cars by throwing them a few hundred bucks in tax breaks.
There are no easy solutions for Detroit. This tax break is a Band-aid on a gaping wound – it’s just not enough to stem the bleeding.