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February 10, 2009

Mikulski Fighting To Save Car Tax Break

Sen. Barbara A. Mikulski said she is worried that a tax break for new car buyers could be watered down or eliminated from the massive stimulus measure that cleared another hurdle today in Congress.

The Maryland Democrat is urging voters to call House members and the White House to demand that Congress preserve the tax break, which could be worth $1,500 to the buyer of a $25,000 car.

In a brief interview this afternoon, shortly before the Senate approved its version of President Barack Obama's $800 billion spending and tax-cut plan, Mikulski expressed concern about the fate of the new car tax break, which she authored.

She pointed out that two of the five senators who will take part in negotiations to craft a final package oppose her idea. Key lawmakers from the House and Senate have been given responsibility to mesh the different stimulus packages approved by the two houses of Congress.

The Senate approved Mikulski's new car tax break last week. However, the House-passed version of the stimulus package contains no such provision.

That could make Mikulski's proposal vulnerable to being weakened or eliminated as negotiators from the two chambers work to produce a compromise that will win enough votes for the measure to be sent to Obama for his signature.

Several moderate Republican senators whose votes are key to winning final approval of the stimulus measure have said they will withdraw their support if the overall size of the package increases. One way to keep the cost in check would be to remove Senate provisions, such as Mikulski's, which has a price tag of $11 billion over ten years, to make room for House-passed provisions that were not included in the Senate-approved version.

Mikulski pointed out that her tax-cut plan is vulnerable because two key Senate negotiators, Finance Committee Chairman Max Baucus, a Montana Democat, and Sen. Charles Grassley of Iowa, the senior Republican on the Finance panel, oppose her plan. Both unsuccessfully advocated its defeat when it was being considered by the Senate.

Mikulski contends that her plan would spur sales of new cars and have the added benefit of helping the environment, since newer cars are typically cleaner-burning than the older models they replace.

Critics argue that the tax break is not the most efficient use of federal money, because many of those who will buy new cars this year would do so anyway.

This morning, Mikulski took to the Senate floor in an effort to generate popular sentiment for preserving her proposal.

"If you want a car in your house, call the White House or call the House of Representatives," she said, standing beside an easel displaying the relevant phone numbers.

"The problem now is not the idea, but it is the politics," Mikulski added. "Let's get the White House on our side. Let's get the House of Representatives on this side."

Referring to recent water-main breaks in Baltimore and Montgomery County, she pleaded with the public to "flood them with phone calls. . . Let's get America rolling again."

If Mikulski's provision is not cut, it could be limited, either by changing the time period that car buyers would have to qualify for the provision, reducing the size of the tax reduction or lowering the income cap for eligible buyers.

As currently drafted, the tax break would apply to new cars purchased from November 2008 until the end of this year. Couples with incomes up to $250,000 and individuals earning up to $125,000 would be eligible to deduct interest payments and sales taxes, regardless of whether they itemize deductions.

According to Mikulski's office, someone in Maryland buying a $35,000 car could save $2,500. Car buyers would get the savings when they file their 2009 taxes next year. Savings would be lower in states with no sales taxes.

For luxury cars, the sales tax deduction would apply only to the first $49,500 of the price. The interest deduction would also apply only to interest on the first $49,500 borrowed.

Her measure was supported by the National Automobile Dealers Association, which said it would attract more buyers to car showrooms and increase sales.

Posted by Paul West at 2:55 PM | | Comments (0)
        

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Annie Linskey covers state politics and government for The Baltimore Sun. Previously, as a City Hall reporter, she wrote about the corruption trial of Mayor Sheila Dixon and kept a close eye on city spending. Originally from Connecticut, Annie has also lived in Phnom Penh, Cambodia, where she reported on war crimes tribunals and landmines. She lives in Canton.

John Fritze has covered politics and government at the local, state and federal levels for more than a decade and is now The Baltimore Sun’s Washington correspondent. He previously wrote about Congress for USA TODAY, where he led coverage of the health care overhaul debate and the 2010 election. A native of Albany, N.Y., he currently lives in Montgomery County.

Julie Scharper covers City Hall and Baltimore politics. A native of Baltimore County, she graduated from The Johns Hopkins University in 2001 and spent two years teaching in Honduras before joining The Baltimore Sun. She has followed the Amish community of Nickel Mines, Pa., in the year after a schoolhouse massacre, reported on courts and crime in Anne Arundel County, and chronicled the unique personalities and places of Baltimore City and its surrounding counties.
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