Congress Trims New-Car Tax Break

An income-tax deduction for interest is taken out of the stimulus bill.
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Congress has scaled back an effort to provide tax relief to new-car buyers as part of the economic stimulus package.

The effort by U.S. Sen. Barbara Mikulski, D-Md., would have offered income tax credits for interest and sales taxes on all new vehicle purchases this year. But after a House-Senate conference on the bill, the credit was scaled back to cover state sales and excise taxes.

"This is still a lot of money in people's pockets," said Mikulski spokeswoman Cassie Harvey. A family making $250,000 annually and paying $35,000 for a

Ford

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F-150 pickup truck would save about $600, while a family making $150,000 and buying a $25,000 Dodge minivan would save about $420, she said.

Overall, the incentive will cost about $2.5 billion, down from $11 billion, Harvey said, adding: "It had a lot of support, but there were a lot of things left out of the conference report."

"Everyone wants to save auto manufacturers, but no matter how much government aid we give to the Big 3 auto makers, they can't survive if consumers don't start buying cars," Mikulski said, in a prepared statement. "My proposal stimulates demand in the automobile industry so that people go to showrooms and buy cars."

Senators voted 71-26 to include Mikulski's amendment in the American Recovery and Reinvestment Act (ARRA). It passed the Senate Tuesday, but was not part of the version that passed the House earlier this month. The bill now returns to both houses for final approval. The stimulus is now valued at $789 billion, down from $838 billion in the Senate version and $819 billion in the House version.