Car loan tax break is axed

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 taxes and excise taxes paid on new vehicles.

But the compromise worked out between House and Senate negotiators deletes another provision that senators had approved, which 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 A. Mikulski (D-Md.), who sponsored the original tax break.

Mikulski had said her original version would have saved buyers $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 $790-billion stimulus package. Trimming the interest deduction from Mikulski’s proposal cut the cost of the tax break from $11 billion to $2 billion.

Congressional leaders said Thursday that they hoped to vote on the stimulus package today and send it to President Obama by Presidents Day, which is Monday.

-- Martin Zimmerman