Tuesday, April 19, 2005

HoustonChronicle.com - Burns: Guzzle away Uncle Sam's buying

Uncle Sam's buyingThe owners of heavy vehicles get a subsidy as the fuel flows

By SCOTT BURNS
Universal Press Syndicate

How would you like the U.S. government to send you a check that would pay for five years' worth of gasoline?

Well, it can be arranged.
Not everyone is eligible, of course. But if you use a vehicle 100 percent for business and purchase a vehicle, new or used, from a select list of big-time gas guzzlers, Uncle Sam is ready to help you out.

Yes, I'm talking about the well-publicized special tax break for vehicles with a gross weight of at least 6,000 pounds. Gross weight is the weight of the vehicle including fuel, passengers and payload. Because of this, gross weight can be a good deal more than the empty weight of the vehicle.

Forty-one domestic and 15 foreign SUVs qualify for this tax break. The Porsche Cayenne, a notably businesslike vehicle, is among them. As a consequence, while the depreciation write-off for any passenger car used for business is limited to only $2,960 in 2005, down from $10,610 in 2004, those claiming 100 percent business use of these SUVs could deduct 100 percent of the $89,665 price of the Porsche Cayenne Turbo during 2003 and until late October 2004.

For those who bought in time, the write-off represented an immediate income tax savings of $31,383, provided the buyer was in the 35 percent tax bracket. Think of it as a bagatelle for the nonindigent from the Jobs and Growth Act of 2003.
One of the particularly compelling uses I've seen of this tax break was a bright parrot-green Hummer2 parked at a luxury marina in Burnt Store, Fla. A sign on the driver's door advertised a dress shop.

Many readers will note (some with sorrow) that this tax break brought so much well-deserved excoriation to legislators that they closed it.

'Tightened' would be a better description.
If you failed to buy your Porsche Cayenne Turbo by last October, don't despair. Uncle Sam still wants to help. The American Jobs Creation Act of 2004 reduced the immediate deduction to $25,000.

In addition, you can take normal depreciation on the remaining value. Normal depreciation is 20 percent. That would be about $13,000 for the Cayenne Turbo.

So your total tax deduction would be $38,000. For those in the 35 percent tax bracket, that calculates to an immediate tax savings of $13,300.

That, of course is mere money. Suppose we measure the benefit in something of global importance, like gasoline.
According to www.fueleconomy.gov, the Cayenne Turbo gets 13 miles per gallon in the city, 18 mpg on the highway. It has an estimated annual fuel cost of $2,241, assuming a premium fuel price of $2.24 a gallon.

Divide the immediate income tax savings by the annual cost of gasoline and you get the answer: Uncle Sam will pay for 14 years of gasoline, if you bought under the Jobs and Growth Act of 2003, or 5.9 years if you bought under the American Jobs Creation Act of 2004.

We should have a spelling bee for legislators to determine how many can spell 'counterproductive.'

Tax savings for guzzler buyers reduce government revenue, increase the federal deficit, increase our trade deficit and send yet more money to the Middle East.

If we were going to devise a formula for wrecking the country, it would be difficult to improve on this one.
We might as well call this portion of the American Jobs Creation Act of 2004 the Osama bin Laden Support Fund."

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