Mikulski Amendment in Stimulus Bill Provides Incentive to Buy Vehicles - Southern Maryland Headline News

Mikulski Amendment in Stimulus Bill Provides Incentive to Buy Vehicles


By MEGAN MILLER

WASHINGTON (Feb. 4, 2009)—If you're thinking of buying a new car, Sen. Barbara Mikulski, D-Md., has a deal for you.

The Senate voted Tuesday to include Mikulski's Auto Assistance Ownership Amendment in its approximately $900 billion bailout package. The amendment would give a tax break to car buyers, allowing them to deduct loan interest and state sales taxes on purchases of new vehicles.

The tax break applies retroactively to purchases made as far back as Nov. 12, 2008, and up to Dec. 31, 2009. Most Americans would qualify for the tax break, which is open to families with a total annual income under $250,000, and individuals with a total annual income under $125,000.

"President Obama said the goal for the economic recovery program is to create jobs and save jobs," Mikulski said in a written statement. "That's exactly what my amendment does. It's targeted at saving American jobs and helping families buy the cars they need to get to work and take their kids to school."

In Maryland, the real impact of the amendment would probably be felt in the state's many car dealerships, according to Shaun Adamec, a spokesman for Gov. Martin O'Malley. The state brought in $38 million in new car sales taxes last fiscal year.

"The auto industry has long tentacles, so to speak, throughout the state and the country . . . The governor is supportive of any measure that would potentially save or create jobs in the state, and the auto industry is a big part of that," Adamec said.

The tax break would help encourage people to get out and buy, according to Bailey Wood, spokesman for the National Automobile Dealers Association.

"We've seen studies that show there's a great deal of consumer interest in purchasing new cars," Bailey said. "We just need to motivate them to get into dealerships, and this would be a great incentive."

But Fernando Schirazi, sales manager for the Ourisman Chevrolet dealership in Marlow Heights, Md., says that the real problem for car dealers is not motivating people to shop—it's finding shoppers who have the means to buy.

"Right now we're having a lot of difficulty getting qualified people to purchase cars," Schirazi said. "One issue we have is the number of people who can borrow money is low. There are people who are willing, but they are not able to borrow money."

People seeking car loans will run into the same problems facing other borrowers in the current economic climate, said James J. Angel, associate professor of finance at Georgetown University. Because banks lost a lot of money through bad loans, they bolster their capital reserves by scaling back lending.

"They're going to be making fewer loans, and they're going to be much more careful about the kinds of loans they do make," Angel said. "There are still lenders out there, but in order to get the best rates you have to have better credit."

The promise of a tax break might tip the scales for consumers who were already considering a new car purchase, Angel said, but probably won't cause a run on the car dealerships.

Dr. Joseph Cordes, professor of public policy, public administration and economics at George Washington University, agreed.

"I don't want to say it's going to have no effect," he said. "My own sense is that it would have a small positive effect at the margin for some people, but it really wouldn't have a very significant effect in terms of encouraging people who otherwise wouldn't have bought a car to buy one."

"I would regard this as a kind of symbolic act," Cordes added.

The Senate is expected to vote on the full economic stimulus package sometime next week, however its final form is uncertain as changes are made to ensure its passage. Mikulski's amendment received strong support; it was approved 71-26.

Capital News Service contributed to this report.

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