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Senate to mull bill to temporarily deduct sales tax, interest on auto loans

November 17, 2010

A Maryland senator has a rescue plan for new-vehicle sales. She wants to eliminate sales and excise taxes as well as interest on auto loans on any new vehicles purchased by year’s end.

Sen. Barbara Mikulski (D-Md.) said she would introduce the Auto Ownership Tax Assistance Amendment when the Senate reconvenes Nov. 17. The tax break would be available on new vehicles purchased from Nov. 12 to Dec. 31.

Consumers would be able to deduct the excise tax and the interest payments from their income taxes for the life of the loan. Mikulski said the temporary tax break would save someone financing a new $25,000 car about $1,320.

"I want to stimulate demand so that people are actually coming into the showrooms and buying cars," Mikulski said. "It is timely because the largest (sales period) tends to be Thanksgiving to New Year’s Eve. We want to get people in the showrooms now."

The deduction would be available for individuals who earn up to $125,000 and families making less than $250,000 a year, and for car loans up to $49,500. The deduction would be phased out for those who earn more. Mikulski said she wants to attach the amendment to the current $700 billion bailout plan, which she said has focused, so far, on the banking industry.

Mikulski said the stimulus for consumers would help keep dealerships open and maintain the jobs of their employees.

The senator was confident that there would be an imminent bailout plan for auto manufacturers. She said she has support across the aisle for the tax break, which would cost about $1 billion.

Congressional Democrats are pushing legislation to send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.