Wednesday, August 24, 2005
Massive US subsidies for SUV's
Here is a little story from the US on the sale of Luxury SUV's. It explains alot.
Jax
"I am about as left as you can get and still be considered a mature thinking adult. To my shame, my wife and I (we do have four kids) bought a luxury Lexus SUV last year. We had even put ourselves on the waiting list for a Prius when we were shopping for a new car. What finally put us over the fence is that the Bush tax cuts allowed me, a sole proprietor, if I used the vehicle soley for business (which I do) to deduct the entire cost of the largest size SUV from my taxes in the first year if I bought a vehicle weighting over 6000 lbs. This worked out as a subsidy worth over $17,000 for the purchase of this car. (This has since been modified). No wonder there was such an explosion of luxury SUV's on the road. Curiously, the car we bought weighed in at 6005 lbs and there were a couple of BMW, Mercedes, Cadillac, Porsche and other models which were marginally over the threshold as well. (There are also models which are way over the 6000 lb mark but it is obvious the car companies were reading, perhaps writing, the tax law very closely).
This perverse tax incentive effectively allowed me to buy this luxury SUV gas guzzler (17MPG) at greater than a 1/3 discount to whatever price I could negotiate. On purely economic terms, it was a no brainer ... we were almost compelled to buy the car." (Link)
Jax
"I am about as left as you can get and still be considered a mature thinking adult. To my shame, my wife and I (we do have four kids) bought a luxury Lexus SUV last year. We had even put ourselves on the waiting list for a Prius when we were shopping for a new car. What finally put us over the fence is that the Bush tax cuts allowed me, a sole proprietor, if I used the vehicle soley for business (which I do) to deduct the entire cost of the largest size SUV from my taxes in the first year if I bought a vehicle weighting over 6000 lbs. This worked out as a subsidy worth over $17,000 for the purchase of this car. (This has since been modified). No wonder there was such an explosion of luxury SUV's on the road. Curiously, the car we bought weighed in at 6005 lbs and there were a couple of BMW, Mercedes, Cadillac, Porsche and other models which were marginally over the threshold as well. (There are also models which are way over the 6000 lb mark but it is obvious the car companies were reading, perhaps writing, the tax law very closely).
This perverse tax incentive effectively allowed me to buy this luxury SUV gas guzzler (17MPG) at greater than a 1/3 discount to whatever price I could negotiate. On purely economic terms, it was a no brainer ... we were almost compelled to buy the car." (Link)
