The $789.5 billion economic stimulus package that President Barack Obama is expected to sign into law next week will contain a slimmed down version of the new car tax break authored by Democratic Sen. Barbara A. Mikulski of Maryland.

Under the stimulus deal that Congress is likely to approve over the next few days, buyers of new cars, light trucks, recreational vehicles and motorcyles will be able to deduct the state sales and excise taxes from the purchase on their federal returns next year.

“Everyone wants to save auto manufacturers, but no matter how much government aid we give to the Big Three auto makers, they can’t survive if consumers don’t start buying cars. My proposal stimulates demand in the automobile industry so that people go to showrooms and buy cars. At the same time, it lends a helping hand to struggling families who need to buy a car to get to work and take their kids to school,” Mikulski said today in a prepared statement.

The tax break, which will cost $1.684 billion, no longer includes deductions for interest payments on car loans, a feature of Mikulski's original plan.

Leaders of the Senate Finance Committee, who were negotiators on the final package, strongly opposed Mikulski's idea, which would have cost $11 billion over ten years.

Her original plan was reduced in scope as part of a broader effort to lower the final price tag on the stimulus package and provide more money for infrastructure spending and education.

But Mikulski scored a major legislative victory by getting her provision into the final deal at all. It was one of only two so-called rifle-shot tax breaks supported by industry lobbies and approved by the Senate; the other was for homebuyers.

The Mikulski amendment, which gained Senate approval earlier this month, was strongly supported by the National Automobile Dealers Association. The industry lobby had urged car dealers from around the country to pressure their representatives in Congress to support the plan.

Critics of the measure call it an inefficient way to stimulate the economy. Many of those who will purchase new cars this year would have done so anyway, they argue.

Mikulski contends that her amendment will attract more buyers into car showrooms and benefit the environment by replacing older, less fuel-efficient models with new ones.

The provision will apply only to new vehicles purchased between the date that the bill is signed into law, presumably next week, and the end of this year. Originally, it would have covered new cars bought as early as last November.

By eliminating the interest deduction provisions in the original Mikulski plan, the tax savings for the average car buyer are also reduced substantially.

According to Mikulksi's office, a family that takes advantage of the new car tax break will pay between $300 and $600 less in federal taxes next year. Originally, those savings were projected at $1,500 for buyers of a $25,000 car and $2,500 on a $35,000 car.

Families earning up to $250,000 a year and individuals who earn up to $125,000 are eligible for the tax break.

It is an "above-the-line" deduction, which means it can be taken by anyone who owes federal income tax. The break applies only to the first $49,500 of the vehicle's purchase price.