Car Scrappage Plan and Auto Tax Deductions Coming says Obama

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Car Scrappage Plan and Auto Tax Deductions Coming says Obama
Photo Courtesy whitehouse.gov

While President Barak Obama’s press conference on what his administration is doing to solve the crisis in the U.S. auto industry focused mostly on helping out General Motors and Chrysler, he did give brief mention of a few initiatives aimed at jump-starting car sales at the consumer level.

Two main programs were discussed, including a scrappage program and tax deductions.

President Obama said that he will be looking into ways to see if there is any money to set aside in a fund to create a scrappage plan. While no specifics were given as to the details of the plan, usually these programs give consumers a significant rebate on the purchase of a new car when they trade in or “scrap” their old car. Often cars must be close to 10 years of age to qualify.

A similar program was launched in Germany several months ago with resounding success, boosting car sales by 21 percent in February over the previous period a year earlier. President Obama said that such a plan in the United States could increase car sales by as much as 100,000 units in 2009.

It is not clear if the scrappage plan would apply to just GM and Chrysler products, or to any vehicle manufactured within the United States, or to any vehicle at all.

The second incentive would allow for tax paid on a new car to be deducted from one’s income tax. This program is further developed as President Obama said his administration has already begun working with the IRS. A specific time frame has also been given that would seen the tax deduction apply to any vehicle purchased between February 16th and December 31st of this year.

The scrappage plan, once it goes into effect, would be retroactive as of today.

  • D. Martin

    I decided to do my part and purchased a Chrysler. I took delivery on February 12th. It’s too bad that those of us who face layoff and who tried to help sales prior to February 16th can not get the tax deduction. Sales were down in January and February this year..the tax deduction should retro back to January 1, 2009 for the entire tax year.

  • Stephanie

    Why couldn’t this start at the beginning of February. I purched 2 new vehicles in February but they were purchased 2 days before the 16th of the month!! I agree with D. Martin, it should start at the beginning of the year!

  • http://www.grantbailoutplan.com/ Stephanie

    Why couldn’t this start at the beginning of February. I purched 2 new vehicles in February but they were purchased 2 days before the 16th of the month!! I agree with D. Martin, it should start at the beginning of the year!
    Sorry… forgot to say great post – can’t wait to read your next one!

  • Peter MacGillivray

    While supporters tout a similar German program as evidence of success, the European Federation for Transport and the Environment, (the pan-European federation of environmental groups), has urged Germany and other countries to abandon scrappage subsidies because they do more environmental harm than good by artificially accelerating the car life cycle.
    The Specialty Equipment Market Association applauds efforts to help consumers, automakers and dealerships with a program to stimulate new car sales. We support the concept of government-issued vouchers toward the purchase of fuel-efficient new vehicles and allowing consumers to deduct the car interest payments on their taxes.
    However, SEMA continues to oppose tying these vouchers to vehicle scrappage programs, known as “cash for clunkers.” The programs accelerate the demise of older vehicles, which are then typically crushed into blocks of sheet metal. Scrappage programs focus on a car’s age rather than how much it is driven or its actual emissions. SEMA has consistently warned against wasting taxpayer dollars on a program that may produce an artificial spike in sales, but does not reduce emissions or increase fuel efficiency.
    Automakers and dealers need to sell cars in order to survive, but potential buyers have hit the brakes in these tough economic times. Scrappage programs actually would deny vouchers to the majority of people who may want to buy a new car but don’t have an eligible older car to trade. Instead, these programs will be misused by those who own two or three older cars and seek to take advantage of the taxpayer give-away. Many of these cars aren’t frequently driven, if at all, so destroying them will not clean the nation’s air or make us less dependent on foreign oil.
    While supporters tout a similar German program as evidence of success, the European Federation for Transport and the Environment, (the pan-European federation of environmental groups), has urged Germany and other countries to abandon scrappage subsidies because they do more environmental harm than good by artificially accelerating the car life cycle.
    Scrappage programs hurt thousands of independent repair shops, auto restorers, customizers and their customers across the country. This industry provides thousands of American jobs and generates millions of dollars in local, state and federal tax revenues. We encourage the President to help the entire auto industry with programs that focus the incentive where it counts – on the purchase of new vehicles and not destroying older cars.

  • Patrick Fohneng

    It’s unfortunate that GM over the years has put on too much manufacturing fat.I humbly think that unless GM is able to loose some of this exyra weight in terms of health insurance policies and pension schemes they are heading for the rocks. i hope the new team at GM will be courageous enuogh to take the hard and painful but unavoidable decisions.

  • Bill

    Hey PETER, what the he11 are you talking about???? If a person does not have a vehicle that is old enough to qualify, then chances are that they have a vehicle that is newer than most! Newer vehicles equals less pollution. As for “taking advantage of a taxpayer giveaway”–don’t forget that we are all paying for this thru taxes, so if anyone wants to help the auto industry and purchase a vehicle, buy gasoline, insurance, aftermarket parts, etc, I say let them. We are not talking about destroying classic Corvettes. I think the older vehicles that will be traded are the ones that are not restorable. More money will be generated by the sale of new vehicles than someone holding onto that 1982 Olds Cutlass Supreme and clogging up the roads!!!