Monday, June 18, 2007

Ed Markey Vs. Hummers

Congressman Ed Markey (D-Malden) was interviewed today on NPR's All Things Considered by Andrea Seabrook regarding his pending legislation to end the tax breaks on Hummers and large luxury SUVs. That loophole is a remnant from an attempt in the 80's to limit the amount of money could be written off for luxury vehicles used for businesses. Any vehicle weighing more than 6,000 pounds was excluded, however, because at the time, most vehicles that heavy were trucks, tractors or limousines essential for business those businesses that depend on such equipment. Now, of course, many SUVs, weigh more than three tons, and owners are able to claim tax deductions of up to $25,000, even if the large vehicle is not necessary for their business.

Here's some of what Markey had to say:

[The tax credit] was intended for, basically, people who needed it — if you ran a limousine service, for example, or you're a contractor who needed a larger vehicle. But what it morphed into was something that allowed just about anyone to claim the deduction once they said that they were a businessman or woman. So, if the Hummer tax loophole wasn't on the books, and there was an even tax-depreciation schedule across the board for all vehicles, the Congressional Budget Office reckons that the federal budget would save $4 billion. ... It would be a $4 billion tax savings over a five-year period.
What does Markey think eliminating the loophole would accomplish?
If the Hummer tax loophole wasn't on the books, people would not decide, on the recommendations of their accountants, to buy the bigger vehicle because they got a bigger tax break. It would be a level playing field, and all vehicles, including hybrids, would be in a better situation to compete against Hummers, because the tax depreciation schedule would treat every vehicle equally.


There will be much less of a financial incentive to purchase the larger vehicle, since smaller vehicles — the hybrids — will now be on a level playing field. There is a very high likelihood that people will no longer have this extra bias toward the larger vehicle because they're saving money.
This seems perfectly sensible. As long as legitimate businesses are not penalized for having to use heavy equipment, there's no reason that the government should be giving out incentives for people to buy bigger vehicles. The incentives should, if at all, work the other way and encourage the adoption of more fuel-efficient cars. Good for Congressman Markey for addressing this issue.