Congress reduces tax break for new car buyers

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A proposed tax break for new car buyers has been downsized by Congress.

The compromise version of the ginormous economic stimulus bill includes a Senate-approved provision that would allow consumers to claim a federal income tax deduction for sales and excise taxes paid on new vehicle purchases.

However, the compromise worked out by House and Senate negotiators deletes a provision that would have made interest on new-vehicle loans deductible as well.

Under the new version, a family could save between $300 and $600 on a new car, according to a statement released by Sen. Barbara Mikulski (D-Md.), who sponsored the original tax break. Mikulski had said her original version (read the details here) would have saved $1,500 on a $25,000 new car purchase.

According to Automotive News, the tax break was scaled back to appease lawmakers concerned about the high cost of the $789-billion stimulus package. Trimming the interest deduction from Mikulski’s proposal cut the cost of the tax break to $2 billion from $11 billion.

Congressional leaders said today they hoped to vote on the stimulus package Friday and send it to President Obama by the Presidents Day holiday Monday.

-- Martin Zimmerman