Along with the news of deep federal intervention into the automaking industry, President Obama mentioned three government incentives Monday designed to motivate Americans to buy American autos.
One, a tax break for certain new-car buyers, was part of Obama's economic stimulus package. Another, a federal backing of warranties from GMC and Chrysler, began yesterday. The third, a "cash for clunkers" trade-in program toward new, more efficient vehicles, needs Congressional approval.
A breakdown of the three:
Buy a car, deduct some taxes
The recent stimulus package allows most car buyers to deduct state and local sales and excise taxes on a new car purchases. The deduction applies to taxes paid on the first $49,500 of a vehicle purchase, domestic or foreign.
Some caveats: The tax break isn't immediate; you pay the sales and excise taxes when you make your purchase, then deduct them later when you file your 2010 return. Also, the benefit starts decreasing for individuals who make more than $135,000 in adjusted gross income - $250,000 for joint filers.
The deduction is good on cars purchased between Feb. 17, 2009 and Jan. 1, 2010.
To calm concerns about buying a car from an automaker that might not be here a year from now, the Treasury Department has created a new program in which warranties for GM and Chrysler vehicles will be covered if GM and Chrysler aren't around to cover them.
The program creates an account funded by manufacturers and the government that would honor the warranties in the event of a Chapter 11 filing, which seems a good possibility given Obama's hint Monday that it's a legitimate option for carmakers.
Cash for clunkers
Obama expressed support for this interesting incentive, which didn't make it into the stimulus package. A handful of Senate and House proposals need to be sifted before a final plan emerges. Given Obama's verbal signal, that likely will happen soon.
Depending on the legislation, the program would offer $3,000 to $7,000 cash for your trade-in vehicle, as long as that vehicle is 8 years old or getting worse than 18 miles per gallon. Any one of those numbers could change as legislators shape the bill, but it probably will include most or all foreign or American cars.
A similar incentive program helped motivate buyers in Europe. The idea here is the same with all three programs - to help not only struggling automakers, but all the ancillary businesses that are tied to the industry's success.
Tell us what you think. Are you more motivated to buy?
Your Morning Edge:
There aren't many precedents for the government control that Obama announced yesterday over GM and Chrysler, the New York Times reports.
An auto worry: Obama's intentions were good, but such corporate welfare rarely works, writes NYT's David Brooks.
The Wall Street Journal's Gerald Seib says Obama is trying to find the space between opposition to bailouts and desire to stop significant loss of manufacturing jobs.