Wednesday, February 4, 2009

Tax credit for new car purchases

The U.S. Senate Tuesday voted to amend the economic stimulus package add a tax credit for purchases of new cars. If this makes it through, it would mean a savings of about $1,500 on a $25,000 vehicle. It would be in the form of a tax rebate against sales tax and deductions against interest paid.
This is great news for SE Michigan and the auto industry. It is also a stimulus idea that might actually stimulate economic activity. Let's face it, that package contains more pork than a whole-hog sausage.
The question I have is why hasn't Michigan's Legislature pursued such an idea?
Just last week, a similar proposal to cut sales tax on car purchases came up in the North Dakota Legislature. It was defeated, but at least they considered it. And there are very few car manufacturers in North Dakota.
The idea of a tax break seems like a natural for a car-producing state. After all, if you travel to Kentucky and several other tobacco producing states, you can purchase cigarettes that are close to tax-free. Why not have car buyers traveling to Michigan to buy cars tax-free?
If Congress does pass such a credit, why can't Michigan match it?


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