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Thread: SUV tax Loophole

  1. #1
    Veteran Member Hello~Kitty's Avatar
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    Default SUV tax Loophole

    However, I did contribute significantly to the $2,000 taxpayer financed 'gift' to a Hybrid owner
    Somehow this little fact about SUV buyers able to deduct $25,000 right off the bat, then getting to deduct 30 percent of the remaining cost as part of the March 2002 economic stimulus package AND another 20 percent of the remaining price for the standard 5-year depreciation for a grand total of $36,260 tax deduction seems to be swept under the rug.

    Hmmm... a $2,000 tax break for helping to lower energy costs and lessen pollution compared to a $36,000 tax break for driving a gas guzzler....and yet her complaint is about the hybrid deduction




    http://www.taxpayer.net/TCS/wastebas...2-28suvtax.htm
    Last edited by Hello~Kitty; 04-21-2005 at 01:00 AM.
    Example of discrimination (Imho):

    the only prudent way to treat Islamics in the US and western europe today is along the same vein as Russians and Eastern Europeans were treated during the 'cold war' days - with some degree of suspicion warranted until proven otherwise !

    http://www.stripperweb.com/forum/showthread.php?t=44590




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    Banned Melonie's Avatar
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    Default Re: SUV tax Loophole

    This has never been swept 'under the rug'. However, it has been distorted quite a bit.

    First, the Hybrid Vehicle $2,000 tax credit is a CREDIT ... meaning that any person who buys a hybrid gets a $2,000 reduction in their tax bill (or I suppose a $2,000 tax refund if they didn't owe any taxes, or some combination). Any person who buys a hybrid can take the credit.

    On the other hand, the 6,000lb vehicle business expense tax deduction is a DEDUCTION. For starters this means that if the eligible 6,000lb vehicle costs $36,000, that the actual cash value of the deduction is NOT $36,000. Instead the cash value of the deduction is the difference between the taxes due on the income of that business, versus the taxes due on the income of that business with the cost of the 6,000lb vehicle subtracted. If the tax rate on the business is say 20%, then in really rough terms the cash value of the $36,000 deduction is something like $7,200.

    As to the intent of the hybrid vehicle tax credit, it was meant to subsidize/encourage hybrid development of very fuel efficient low emission vehicle technology. However, with the exception of the very first hybrid vehicles upon which the tax credit law was passed, most hybrid vehicle sales this year also have large gasoline engines and use the hybrid function as an 'environmentally friendly turbocharger' to increase performance, with very little actual improvement in gas mileage and with very little reduction in emissions. Thus there is no longer much of the original intent remaining i.e. the US gov't spends $2,000 and gets a 3mpg savings in fuel consumption and a few percent reduction in exhaust gases.

    The 6,000lb vehicle business expense deduction was intended to provide an incentive for small businesses to expand, by making it easier to add delivery vans, service trucks, etc. The secondary intent was that by encouraging businesses to purchase additional vans and trucks, those businesses would also be hiring additional drivers to make deliveries, hiring additional servicemen and technicians etc. The financial idea behind the 6,000lb vehicle tax credit was that the $7,200 initial cost to the gov't would be quickly repaid in the form of higher business tax receipts from the expanded business's greater profits, plus new income tax receipts from the additional drivers, servicemen and technicians.

    The 'abuse' of the 6,000lb vehicle tax deduction was that some affluent people who operate businesses discovered that there were (initially) a couple of huge SUV's which met the eligibility requirement. This led to some people who operate businesses deciding to purchase the huge 6,000lb SUV for personal use rather than business use, and benefit from the $7,200 cash value of the tax deduction.

    This misuse of the 6,000lb business vehicle deduction obviously does not follow the original intent of the deduction, but then IMHO neither does buying a hybrid vehicle which only gets an extra 3mpg like the new Honda Accord. From the US gov'ts standpoint, the quickly concluded that all of the heavyweight huge SUV's involved in the misuse of the 6,000lb vehicle law were made by American manufacturers - meaning that even if no new jobs were being created and no new taxes were collected that, by spending $7,200 in tax money, a new 'customer' was spending $36,000 in Detroit and helping pay UAW salaries (thus avoiding the potential cost of unemployment benefits for some UAW workers plus avoiding lost income taxes on that UAW worker's salary). On the other hand, when the gov't spends $2,000 on the hybrid vehicle, no new jobs are created and no new taxes are collected either, plus the money essentially goes straight to Japan instead of to US autoworkers.

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by Melonie
    any person who buys a hybrid gets a $2,000 reduction in their tax bill

    On the other hand, the 6,000lb vehicle business expense tax deduction {means}if the eligible 6,000lb vehicle costs $36,000, that the actual cash value of the deduction is something like $7,200.
    Now THERE's a reason to support it, 3:1 more costly to the taxpayer than the hybrid, and NOT available to everyone

    The 6,000lb vehicle business expense deduction was intended to provide an incentive for small businesses to expand
    provided the small business buys a large, fuel-guzzling vehicle....whether or not such a vehicle suits their needs or business.

    those businesses would also be hiring additional drivers to make deliveries, hiring additional servicemen and technicians etc
    and of course the only companies with such staff need LARGE vehicles..unlike those computer repair, medical delivery, and hundreds of other services that can only benefit from the business incentive if they pass up the fuel and maintenance advantages of smaller vehicles.


    . The financial idea behind the 6,000lb vehicle tax credit was that the $7,200 initial cost to the gov't would be quickly repaid in the form of higher business tax receipts from the expanded business's greater profits, plus new income tax receipts from the additional drivers, servicemen and technicians.
    Where is the data? Did this occur?

    The 'abuse' of the 6,000lb vehicle tax deduction was that some affluent people who operate businesses discovered that there were (initially) a couple of huge SUV's which met the eligibility requirement. This led to some people who operate businesses deciding to purchase the huge 6,000lb SUV for personal use rather than business use, and benefit from the $7,200 cash value of the tax deduction.

    This misuse of the 6,000lb business vehicle deduction obviously does not follow the original intent of the deduction, but then IMHO neither does buying a hybrid vehicle which only gets an extra 3mpg like the new Honda Accord.
    1. then support both or neither, once

    heavyweight huge SUV's were made by American manufacturers
    in their canadian, mexican or other plants....just ask Chrysler where their vehicles are made. It's the 51st state known as "canada"


    On the other hand, when the gov't spends $2,000 on the hybrid vehicle, no new jobs are created and no new taxes are collected either, plus the money essentially goes straight to Japan instead of to US autoworkers.
    1. Japanese automakers make many models in the US...some make more models here than US manufacturers

    2. coud this be an incentive for us manufacturers to produce vehicles that qualify, as the "fat SUV" deduction and CAFE standard loopholes encouraged automakers worldwide to adjust their designs to qualify?

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    God/dess montythegeek's Avatar
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    Default Re: SUV tax Loophole

    First off the concept of depreciation in tax laws if often confused. Depreciation is a charge against income. The 2002 and 2003 tax laws merely let a company recognize the costs sooner, rather than later. It reduces their tax bill now and if their tax rate in the future is the same, raises their tax bill because you could not reduce taxes later. It is all a matter of time shifting when you pay the taxes on the income The sole benefit to the person is the interest on the money not spent in taxes in the early period, but paid later.

    The "loophole" as it applies to large vehicles is nothing more than ending for a few years the fact that the larger vehicles are discriminated against in the law before and in fact their buyers were penalized, even if a smaller vehicle was incapable of doing the job. While a few hummers got sold as a result, the vast bulk of the vehicles which could qualify are things like dump trucks and busses like Hertz and Avis use to shuttle customers to their lots.

    While I do not like the government using depreciation rules to stimulate investment (since they almost always do it for too long and on the wrong things). It is not the massive giveaway that it could sound like.

    As for the total effect on all equipment, the law will cause a $44 billion JUMP in their tax bills as of 1/1/2005 (see http://www.bea.doc.gov/bea/dn/technote_jobcreation.xls note this is an excel spreadsheet at the BEA-the folks who add up GDP)
    Then they will start paying back for depreciation they "took early" under prior law and their tax bills will zoom even higher..

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    imagine how high the numbers would have gone if ANY business vehicle was eligible


    What is this "SUV discrimination" you speak of?

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    Default Re: SUV tax Loophole

    First of all, hybrids are not just adding 3 mpg. Second, even if they only add 3 mpg, it is nearly a 10% improvement in fuel economy.

    Over the course of 20,000 miles (average for most workers), it is a savings of 60 gallons/year. If 10M people gained 3 mpg, it would save us 600 million gallons of gas per year.

    Since the largest source of air pollution is vehicle traffic we could cut emissions by more than 10% if we could get a 3mpg improvement.

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    Veteran Member Hello~Kitty's Avatar
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    Default Re: SUV tax Loophole

    To top things off Dems tried to close this loophole and guess who opposed closing it ? GOP members. This is a great example of my frustration with current GOP leadership. Where is the fiscal responcibilty that is supposed to be a hallmark of the rightwing ?

    Certianly makes me wonder why GOP people would oppose fixing this loophole ? Could it be the large number of oil folks who are either actual GOP leaders or lobby people ??? Could it be that by encouraging people to buy gas guzzlers they pad their own bank accounts that much more?

    Yup. That is exactly what it is....if it was anything else then this loophole would have be fixed to include ONLY those it was originaly intended to help.

    Geez, I can't wait untill we actual have a bipartisian government again !

    And I have to wonder why any person would complain about the hybrid credit and yet never previously even mentioned the SUV situation, despite the fact amount is more than double the hybrid credit.

    Things that make you go ..Hmmm ? LOL!
    Example of discrimination (Imho):

    the only prudent way to treat Islamics in the US and western europe today is along the same vein as Russians and Eastern Europeans were treated during the 'cold war' days - with some degree of suspicion warranted until proven otherwise !

    http://www.stripperweb.com/forum/showthread.php?t=44590




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    Banned Melonie's Avatar
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    Default Re: SUV tax Loophole

    And I have to wonder why any person would complain about the hybrid credit and yet never previously even mentioned the SUV situation, despite the fact amount is more than double the hybrid credit.
    You are again missing the point. While the 6,000lb vehicle business expense deduction may 'cost' the gov't money in the short term, in the long term it produces more money for the gov't in new tax revenues than the original deduction cost in lost tax revenues. Therefore the net cost of the 6,000lb vehicle business expense to the gov't is in the worst case ZERO and in the best case it EARNS ADDITIONAL MONEY for the gov't in the form of increased tax revenues.

    On the other hand, the $2,000 hybrid vehicle tax credit DOES COST the gov't $2,000 a pop, with little possibility of stimulating new US business activity which will cause growth, increase profits, and provide new and/or larger tax revenues to offset the original $2,000 cost. If you have noticed, the lion's share of the hybrids are made in Japan and imported, because essentially none of the US hybrid vehicles are ready for the market yet.

    I don't blame the Republicans for opposing the dumping of the 6,000lb business expense tax deduction, because despite the possibility for 'abuse' it still stimulates business growth, new job creation, and new tax revenues.

    To the point about the $2,000 tax credit being 'worth it' to achieve even a 3mpg increase in fuel efficiency, IMHO this is preposterous. There is already a well proven technology i.e. small diesel engines which would provide an across the board 33% + improvement in fuel efficiency. Many existing car models are already available in Europe with small diesel engines, and the diesel option costs virtually nothing extra in the way of the price of the cars, yet these small diesel engine vehicles are not legal for sale in the 5 Democratic states with super-strict emissions requirements for autos (notably California and New York) and are therefore not imported at all. But at the same time, these 5 states with super-strict emissions requirements allow huge SUV's to spew huge amounts of exhaust gases because, as 'trucks' they are exempted from the super-strict emissions requirements.

    Both the hybrid vehicle tax credit and the outlawing of small diesel engine cars exemplify Democratic programs which are supposedly well intentioned, but which in actuality cost quite a bit of money and achieve next to nothing in terms of achieving an overall objective. They are however politically correct !
    Last edited by Melonie; 04-21-2005 at 12:53 PM.

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Melonie....you keep skipping the part that explains why ONLY COMPANIES PURCHASING LARGE VEHICLES DESERVE THE EXPANSION ASSISTANCE.

    what about:
    sales people
    deliveries of small goods
    technicians/repair folks
    entrepreneurs like me
    mechanics
    visiting doctors/nurses
    ...I could go on ALOT...
    Heck, even companies that offer dancers for bachelor parties don't need a 6,000 lb vehicle

    If the deduction was for ALL business vehicles, color me satisfied.
    As the deduction discriminates against those who don't need or want a LARGE vehicle...color me pissed

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    Banned Melonie's Avatar
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    Default Re: SUV tax Loophole

    If the deduction was for ALL business vehicles, color me satisfied.
    As the deduction discriminates against those who don't need or want a LARGE vehicle...color me pissed
    Actually you CAN take a business expense tax deduction for ANY business vehicle regardless of weight, even hybrid vehicles. However, you will have to spread the depreciation deduction over the amortized life of the vehicle (i.e. $1,500 per year over 5 years) rather than taking the whole $7,200 in the first year. This is the only difference where 6,000lb vehicles are concerned.

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    Veteran Member Hello~Kitty's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by Melonie
    You are again missing the point.
    No, I am not actually. I can spot bias against a typical political party POV when I see it ..... but thanks for the more detailed explanation anyway as it was informative none the less .... which is cool
    Example of discrimination (Imho):

    the only prudent way to treat Islamics in the US and western europe today is along the same vein as Russians and Eastern Europeans were treated during the 'cold war' days - with some degree of suspicion warranted until proven otherwise !

    http://www.stripperweb.com/forum/showthread.php?t=44590




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    Senior Member tooma's Avatar
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    Default Re: SUV tax Loophole

    another intent of the tax benefit was to provide a stimulus to the manufacturing sector. the vast majority of the larger vehicles in question are american made. US companies buying US trucks was a nice bonus to the plan.

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    God/dess Deogol's Avatar
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    Default Re: SUV tax Loophole

    Just a note - my company's computer systems are the size of refridgerators (Sun 10000) and racks of blade servers.

    Saying a computer service company doesn't need a van is "thinking in the living room."

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    Banned Melonie's Avatar
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    Default Re: SUV tax Loophole

    I can spot bias against a typical political party POV when I see it
    If you'll forgive me for defending myself, I would point out that 'bias' requires that positions be taken and/or decisions be made based on pre-conceived notions (usually) not supported by facts. In this case the facts are out there, both in the form of comparative mileage ratings of the three Honda Accords (small gas engine, big gas engine and hybrid) for example, and in the tax law and economic facts behind that law regarding a tax CREDIT versus an 'accelerated' business expense DEDUCTION. Granted that there is some political grumbling in regard to the magnitude of the 'pump priming' effect on business, job and tax revenue growth where the 6,000lb vehicle business expense deduction is concerned, but logically speaking, if there is also any small 'pump priming' effect in regard to hybrid vehicles, the pump is located in Japan.

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by Melonie
    Actually you CAN take a business expense tax deduction for ANY business vehicle regardless of weight, even hybrid vehicles. However, you will have to spread the depreciation deduction over the amortized life of the vehicle (i.e. $1,500 per year over 5 years) rather than taking the whole $7,200 in the first year. This is the only difference where 6,000lb vehicles are concerned.
    This I know, but it does not explain WHY LARGER FUEL CONSUMPTION VEHICLES ARE PREFERRED.

    What is the larger value to the taxpayer, the government, the country, ANYTHING to promote more fuel usage, more wear & tear on the roads I maintain, more dangerous vehicles (Higer center of gravity, longer stopping distance, more deadly to other vehicles in crash, more visually obstructing, etc.)

    I can't sarpen the point anymore.

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by tooma
    another intent of the tax benefit was to provide a stimulus to the manufacturing sector. the vast majority of the larger vehicles in question are american made. US companies buying US trucks was a nice bonus to the plan.
    Please provide evidence of this...last time I went to a dealer most "american made" vehicles were actually Canadian, Mexican or (at best) assembled here from overseas parts

    except of course for Honda and Toyota which make many of their models in the US states

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by Deogol
    Just a note - my company's computer systems are the size of refridgerators (Sun 10000) and racks of blade servers.

    Saying a computer service company doesn't need a van is "thinking in the living room."
    the number of servers vs pcs in your company?

    The server wasn't shipped to you via UPS/Fedex, etc?

    Every time a technician visits you they need to bring an ENTIRE SERVER with them...not simply use a larger vehicle when appropriate?

    What about software support techs?

    Please. I used to do tech support.

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by Melonie
    In this case the facts are out there, both in the form of comparative mileage ratings of the three Honda Accords (small gas engine, big gas engine and hybrid) for example,
    SOmeone else made the point that a 3MPG improvement is MORE THAN A 10% IMPROVEMENT. Here's what 3mpg really means:
    From
    http://www.ucsusa.org/clean_vehicles...cfm?pageID=221
    For every gallon of gasoline that is consumed, approximately 24 pounds of global warming pollutants are released into the air.

    24 pounds *3mpg=72pounds * 1,000 gallons/year (25000 miles at 25mpg)=72000 pounds or THIRTY SIX TONS less pollutants


    ***

    The fuel economy of the average new passenger vehicle peaked in 1988 and is now less than it was 10 years ago. The stagnation of Corporate Average Fuel Economy (CAFE) standards since 1985, doubling of annual vehicle miles driven in the last 25 years and the recent explosion of SUV and light truck sales have eaten away at the nation's fuel efficiency.

    we want to support larger vehicle sales why? they're the leading sector of the auto industry!

    ***
    http://www.aceee.org/energy/cafe.htm

    Raising CAFE standards (or national fuel economy in other ways SUCH AS TAX INCNTIVES - my addition)by 5% annually until 2012 and by 3% per year thereafter could save 1.5 million barrels of oil per day (MBD) by 2010, 4.7 MBD by 2020, and 67 billion barrels of oil over the next 40 years. This is 10–20 times greater than the potential oil supply from the Arctic National Wildlife Refuge.

    economic facts behind that law regarding a tax CREDIT versus an 'accelerated' business expense DEDUCTION. .
    Yes..the credit is valued at a MAXIMUM of $2,000 and helps reduce pollution and our dependence on foreign oil. Puts money DIRECTLY INTO CONSUMER POCKETS and encourages national debate on fuel economy

    The deduction applies to only SELECT BUSINESSES who choose to use AND CAN AFFORD the more expensive vehicle, costs the taxpayers at least $8,000 per vehicle, and encourages more oil consumption and increased development of an allready booming and not-in-need-of-help secctor of the auto industry



    .
    but logically speaking, if there is also any small 'pump priming' effect in regard to hybrid vehicles, the pump is located in Japan.
    Toyota Prius sales recently passed the Hummer H2.* Given the pressing environmental and oil security issues America currently faces, wasting taxpayer money on incentives for vehicles that contribute to both problems simply does not make sense

    http://www.ucsusa.org/hybridcenter/page.cfm?pageID=1702
    Last edited by discretedancer; 04-21-2005 at 08:14 PM.

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Hate to repeat myself..but:

    Theory says Gov't should provide the same opportunities and options to all...not support ANY business or technology. Real world says "larger purposes" make gov't provide deductions, incentives, credits, etc. The thing we need to look at is WHAT LARGER PURPOSE is served and do we, as taxpayers (shareholders) in this nation feel it's good.

    Hybrid incentives....available to ANYONE that purchases a hybrid and serving the larger purpose of reducing our consumption of oil so our nation may more easily limit its dpendence on foreign oil sources. It also spurs national debate on fuel economy, makes fuel economy "sexy" and puts money back in the pocket of Americans both short term (tax credit) and long term (fuel savings). Finally it encourages companies to develop more fuel efficient vehicles.

    or:

    FAT VEHICLES FOR SELECT BUSINESS tax deduction, which outstrips 6x1 (or more) the cost per unit of hybrid vehicle credits. Not equally available for all businesses, This deduction is only available to those wealthy enough to purchase a $40,000 vehicle AND desire or need such a vehicle. It EXCLUDES smaller businesses to whom a $40,000 investmnt is too much, don't need a delivery truck (as opposed to minivan or etc.) businesses smart enough to seek long term savings from using less fuel, those who don't desire the "vanity boost" of a big vehicle, etc. LARGER PURPOSE behind this law? Maybe promote oil consumption for support of lawmaker stocks and perks? Maybe increase our dependence on foreign oil? Who knows?

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    Veteran Member Hello~Kitty's Avatar
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    Default Re: SUV tax Loophole

    LARGER PURPOSE behind this law? Maybe promote oil consumption for support of lawmaker stocks and perks? Maybe increase our dependence on foreign oil? Who knows?

    Exactly !

    Sigh...I wish I had your patience D.D.
    Example of discrimination (Imho):

    the only prudent way to treat Islamics in the US and western europe today is along the same vein as Russians and Eastern Europeans were treated during the 'cold war' days - with some degree of suspicion warranted until proven otherwise !

    http://www.stripperweb.com/forum/showthread.php?t=44590




  21. #21
    Banned Melonie's Avatar
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    Default Re: SUV tax Loophole

    Speaking of patience, it's circular discussion time again ...

    Hybrid incentives....available to ANYONE that purchases a hybrid and serving the larger purpose of reducing our consumption of oil so our nation may more easily limit its dpendence on foreign oil sources. It also spurs national debate on fuel economy, makes fuel economy "sexy" and puts money back in the pocket of Americans both short term (tax credit) and long term (fuel savings). Finally it encourages companies to develop more fuel efficient vehicles.
    Purchasing hybrid Honda Accords is arguably NOT serving the larger purpose of reducing our consumption of oil (at least not IMHO doing it cost effectively by spending $2,000 for a 3mpg improvement). Also if there is a link between a hybrid Honda Accord (and other recent hybrids) and 'sexy', it's because the hybrid has a faster 0-60 acceleration time. Also, the vast majority of hybrids which are being developed for 2006 (available this fall) are hybrid SUV's ! The politically correct 50mpg image of the first Toyota Prius is now the exception rather than the rule among hybrids.

    FAT VEHICLES FOR SELECT BUSINESS tax deduction, which outstrips 6x1 (or more) the cost per unit of hybrid vehicle credits. Not equally available for all businesses, This deduction is only available to those wealthy enough to purchase a $40,000 vehicle AND desire or need such a vehicle. It EXCLUDES smaller businesses to whom a $40,000 investmnt is too much, don't need a delivery truck (as opposed to minivan or etc.) businesses smart enough to seek long term savings from using less fuel, those who don't desire the "vanity boost" of a big vehicle, etc. LARGER PURPOSE behind this law? Maybe promote oil consumption for support of lawmaker stocks and perks? Maybe increase our dependence on foreign oil? Who knows?
    Actually in the vast majority of cases, the $2,000 hybrid vehicle tax credit outstrips the net cost of the 6,000lb vehicle accelerated business expense deduction by (surprise) $2,000. You have consistently ignored the fact that in the vast majority of cases the 6,000lb vehicle business expense deduction creates extra profits for the business and extra jobs, the fact that those extra profits and extra weekly paychecks are taxed, and the fact that the dollar value of those additional tax receipts more than pays for the original cost of the deduction. The extra tax receipts from properly used 6,000lb vehicle business expense tax deductions even generates enough additional tax revenue to pay for the cost of improperly applied 6,000lb vehicle tax deductions which wind up for personal use. As to the 'larger purpose', I guess that economic expansion, velocity of money, the Laffer curve, 'a rising tide lifts all boats' etc. are all to be considered conspiracy theories, while deliberately promoting increased oil consumption and increased exhaust gas emissions is a perfectly logical conclusion ?

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    Featured Member discretedancer's Avatar
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    Default Re: SUV tax Loophole

    Quote Originally Posted by Melonie
    Purchasing hybrid Honda Accords is arguably NOT serving the larger purpose of reducing our consumption of oil Also, the vast majority of hybrids which are being developed for 2006 (available this fall) are hybrid SUV's ! Th
    I refuse to repeat this anymore...10% improvement is better than none.and quite valuable, per the experts



    Actually in the vast majority of cases, the $2,000 hybrid vehicle tax credit outstrips the net cost of the 6,000lb vehicle accelerated business expense deduction by (surprise) $2,000.
    Still waiting for your evidence on this....I looked, can't find anyone demonstrating those tax deductions actually increased tax receipts.

    Also, still waiting for the larger purpose why the accelerated deduction was limited to only the larger vehicles

    You have consistently ignored the fact that in the vast majority of cases the 6,000lb vehicle business expense deduction creates extra profits for the business and extra jobs,
    Can't ignore a fact when it's not a fact. You make a statement, that's not fact. Until I see proof, I debate the "vast majority" and that the extra profits outstrip (in tax receipts) the expense of the deduction.

    As to the 'larger purpose', I guess that economic expansion, velocity of money, the Laffer curve, 'a rising tide lifts all boats' etc. are all to be considered conspiracy theories,
    rising tide...hmm. let's examine recent economic trends:

    Report Says U.S. Deficits Could Cause Damaging Correction
    http://www.npr.org/templates/story/s...toryId=4467938
    and
    Trade Deficit Hits New High in February
    http://www.npr.org/templates/story/s...toryId=4597562
    RISING TIDE OF DEFICITS...THERE's A GOOD SIGN

    Wages fall behind prices
    http://www.npr.org/templates/story/s...toryId=4585718
    and
    http://www.npr.org/templates/story/s...toryId=4607804
    and
    http://www.epinet.org/content.cfm/we...shots_20050421
    Yeah..that's lifting boats! Maybe yachts!

    As Dow Swoons, Economists Grow Concerned
    http://www.npr.org/templates/story/s...toryId=4604035
    The decline comes on the heels of decreasing consumer spending and slowing job growth.
    WATCH OUT FOR THOSE INCREASED TAX RECEIPTS FROM NEW AND EXPANDED PAYROLL!

    Jobless with a degree: the numbers rise
    http://www.npr.org/templates/story/s...toryId=4542578
    hmmm..maybe they should all become delivery drivers with pay that doesn't keep up with prices?

    The Lukewarm 2004 Labor Market
    Despite some signs of improvement in last year's labor market, wages still fell, job growth lagged, and unemployment spells remained long.
    http://www.epinet.org/content.cfm/ib_200502_epi_cbpp

    DEFICITS GROW WELL WITH BUSH
    U.S. borrowing itself into deceptively deep hole
    The United States is currently borrowing $665 billion annually from foreign lenders to finance the gap between payments to and receipts from the rest of the world, an amount equivalent to $5,500 per American household. This borrowing entails serious costs for the U.S. economy and future U.S. living standards. In fact, if the current account deficit doesn't improve, then the external debt of the United States will rise from 24% of total U.S. gross domestic product at the end of 2003 to 64% by 2014. The cost of servicing just the additional debt incurred from 2004 to 2014 will rise to 1.7% of GDP by 2014, the equivalent of $250 billion in 2004 dollars. For an analysis of these trends and the forces driving them, read EPI’s Issue Brief, Debt and the Dollar.
    http://www.epinet.org/content.cfm/Issuebrief203

    http://www.taxpolicycenter.org/publi...?PubID=1000698
    Making the tax cuts permanent is likely to reduce, not increase, national income in the long term unless the reduction in revenues is matched by an equal reduction in unproductive government consumption expenditures...which has decidedly not occurred, or if models with implausible features are employed.


    shall I go on? these links are EVERYWHERE!

  23. #23
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    Default Re: SUV tax Loophole

    HK,
    The law as it existed before the 2003 tax act explicitly discriminated against large vehicles (not just SUV's) by saying that different rules (stricter) apply to heavier gross vehicle weight vehicle (gross weight is vehicle + cargo potential) than smaller vehicles. The implications of the discrimination, or penalty were not large--but they were not allowed to use the same rules as any other vehicle. The 2003 tax act put heavier vehicles on the EXACT same footing as any other equipment investment whether it used energy or not. It said nothing about the fuel efficiency of the vehicle, just its gross vehicle weight.

    The 2003 change made the same rules apply to all vehicle through the end of 2004, but made them apply to heavies for a little while longer(about a year) to make up for the fact that they had been discriminated against in the 2002 act.

    A small business could expense a computer (up to a $ limit), but not a vehicle if it was to heavy. Thus a lot of small businesses were not able to do the same thing as other businesses. The van or pickup a carpenter uses to take tools to a job did not qualify for expensing, but the tool he took to the job did qualify. Say you had a hardwood floor installer. The sander he used qualified but the truck to take it to the job site did not.

    This is not the big deal you make it out to be. A $30K truck when expensed reduces taxes this year. A vehicle when depreciated reduces taxes every year by an amount that adds up to $30K, but is spread over the life of the vehicle. The only difference to the buyer is the interest he could get (or avoid) by taking the up front tax savings and investing it in bonds. The same total number of dollars of tax deductions are taken, just at different times, sooner being preferred to later.

    As far as Melonie's comment that it is revenue enhancing, it is not quite. IT is almost revenue neutral, but not quite. Over the full period there is a small cost to the government (the extra interest the US pays). There is a small partially compensating stimulus effect. It is true that large vehicles are not a great item to discriminate against since they are largely made in the US. The rest of the items which do get the preferential treatment like computers are more heavily imported.

    If you are going to try to use the tax law to stimulate the economy it makes since to not penalize the stuff you make and give all the benefits to foreign made items. The law and international treaties do not let Congress discrimate against imported items or favor directly domestically made items, The different treatment of large vehicles was a grandstand play to say "We saved gas." The result, however, was to allow someone to buy a 15 mile/gallon Ferrari car under the more favorable rules, but not buy a 16 mpg big truck under the same rules.

    When you drive down the street compare the number of hummers to the number of big pickups and panel trucks like florists or repairmen use. Those are "too heavy" under the old rules because they can carry a lot of cargo. (gross vehicle weight is vehicle plus rated cargo)

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    Banned Melonie's Avatar
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    Default Re: SUV tax Loophole

    Thank you Monty. However, you have only addressed the costs of the 6,000 vehicle business expense deduction as a self-contained entity. How about the secondary effects, i.e. businesses able to operate more efficiently, businesses able to expand, businesses hiring additional employees etc. as a result of the gov't incentive to purchase a new vehicle - thus producing additional tax revenue ?

    shall I go on? these links are EVERYWHERE!
    Actually, no they're not. As you have repeatedly pointed out in regard to some of my posted links in the past, NPR and EPINET are not exactly 'objective' sources.

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    Default Re: SUV tax Loophole

    Quote Originally Posted by Melonie
    How about the secondary effects, i.e. businesses able to operate more efficiently, businesses able to expand, businesses hiring additional employees etc. as a result of the gov't incentive to purchase a new vehicle - thus producing additional tax revenue ?.
    you still haven't provided data that these actually are true...nor why certain vehicle types (and companies that use them) should be excluded



    Actually, no they're not. As you have repeatedly pointed out in regard to some of my posted links in the past, NPR and EPINET are not exactly 'objective' sources.
    Some sources are better than others....the links I provide are science-based, and even reference the government's own data. Not saying they are perfect...but in absence of competition they ain't bad.

    Unlike some of your links, none of mine are from groups who were founded to espouse a specific ideology. NPR is a respected news source (less contentious than FOX news...with WAY more experience), UCS is a scientific body that is CONCERNED about what the science suggests, and so on

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