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CORPORATISM -
-

SUV owners get free gas -- courtesy of Uncle Sam

Posted in the database on Sunday, April 24th, 2005 @ 13:47:44 MST (1440 views)
by Scott Burns    MSN Moneycentral  

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How would you like the U.S. government to send you a check that would pay for five years' worth of gasoline?

Well, it can be arranged.

Not everyone is eligible, of course. But if you use a vehicle 100% for business and purchase it, new or used, from a select list of big-time gas-guzzlers, Uncle Sam is ready to help you out.

Yes, I'm talking about the well-publicized special tax break for vehicles with a gross weight of at least 6,000 pounds. Gross weight is the weight of the vehicle including fuel, passengers and payload. Because of this, gross weight can be a good deal more than the empty weight of the vehicle.

Forty-one domestic and 15 foreign SUVs qualify for this tax break. The Porsche Cayenne, a notably business-like vehicle, is among them. As a consequence, while the depreciation write-off for any passenger car used for business is limited to only $2,960 in 2005, down from $10,610 in 2004, those claiming 100% business use of these SUVs could deduct 100% of the $89,665 price of the Porsche Cayenne Turbo during 2003 and until late October 2004. For those who bought in time, the write-off represented an immediate income tax savings of $31,383, provided the buyer was in the 35% tax bracket. Think of it as a bagatelle for the non-indigent from the Jobs and Growth Act of 2003.

One of the particularly compelling uses I've seen of this tax break was a bright parrot-green Hummer2 parked at a luxury marina in Burnt Store, Fla. A sign on the driver's door advertised a dress shop.Banks and insurers
check your credit.
So should you.


Tightened, not closed, loophole
Many readers will note (some with sorrow) that this tax break brought so much well-deserved excoriation to legislators that they closed it.

"Tightened" would be a better description.

If you failed to buy your Porsche Cayenne Turbo by last October, don't despair. Uncle Sam still wants to help. The American Jobs Creation Act of 2004 reduced the immediate deduction to $25,000. In addition, you can take normal depreciation on the remaining value. Normal depreciation is 20%. That would be about $13,000 for the Cayenne Turbo.

So your total tax deduction would be $38,000. For those in the 35% tax bracket, that calculates to an immediate tax savings of $13,300.

Can you say 'counterproductive'?
That, of course is mere money. Suppose we measure the benefit in something of global importance, like gasoline.

According to the U.S. Department of Energy's Fuel Economy Web site, the Cayenne Turbo gets 13 mpg in the city, 18 mpg on the highway. It has an estimated annual fuel cost of $2,241, assuming a premium fuel price of $2.24 a gallon.

Divide the immediate income-tax savings by the annual cost of gasoline and you get the answer: Uncle Sam will pay for 14 years of gasoline, if you bought under the Jobs and Growth Act of 2003, or 5.9 years, if you bought under the American Jobs Creation Act of 2004. The table below shows the approximate years of fuel Uncle Sam paid for business guzzler buyers under both sets of rules. This assumes a typical annual gasoline cost of $2,000 and a 35% tax bracket buyer. The lowest subsidy covers over four years of gasoline.

It suggests that we should have a spelling bee for legislators to determine how many can spell "counterproductive."

Tax savings for guzzler buyers reduce government revenue, increase the federal deficit, increase our trade deficit, and send yet more money to the Middle East. If we were going to devise a formula for wrecking the country, it would be difficult to improve on this one. We might as well call this portion of the American Jobs Creation Act of 2004 the Osama Bin Laden Support Fund.

 Guzzlers escape the high cost of gas
Vehicle Model Gross Wt. MSRP Jobs and Growth Act 2003 Years of fuel paid by tax savings* American Jobs Creation Act 2004 Years of fuel paid by tax savings*
BMW            
X5 6,005 $53,845 $53,845 9.4 $30,769 5.4
Cadillac            
Escalade 7,000 $54,280 $54,280 9.5 $30,856 5.4
Escalade ESV 7,200 $56,160 $56,160 9.8 $31,232 5.5
Escalade SRX 7,000 $43,940 $43,940 7.7 $28,788 5.0
Chevrolet            
Astro Passenger Van 6,100 $27,620 $27,620 4.8 $25,524 4.5
Avalanche 1500 7,000 $36,062 $36,062 6.3 $27,212 4.8
Avalanche 2500 8,600 $36,545 $36,545 6.4 $27,309 4.8
Express Pass. Van 3500 9,600 $30,525 $30,525 5.3 $26,105 4.6
Silverado 1500 6,400 $28,600 $28,600 5.0 $25,720 4.5
Silverado 2500 8,600 $31,999 $31,999 5.6 $26,400 4.6
Silverado 3500 11,400 $34,200 $34,200 6.0 $26,840 4.7
Suburban 1500 7,200 $41,907 $41,907 7.3 $28,381 5.0
Suburban 2500 8,600 $41,280 $41,280 7.2 $28,256 4.9
Trailblazer 6,400 $32,470 $32,470 5.7 $26,494 4.6
Tahoe 6,800 $38,530 $38,530 6.7 $27,706 4.8
Dodge            
Durango 6,400 $33,280 $33,280 5.8 $26,656 4.7
Ram Cargo Van 3500 8,700 $22,150 $22,150 3.9 $24,430 4.3
Ram MaxiVan 3500 8,700 $22,010 $22,010 3.9 $24,402 4.3
Sprinter 8,550 $32,391 $32,391 5.7 $26,478 4.6
Ram 1500 6,650 $26,930 $26,930 4.7 $25,386 4.4
Ram 2500 11,000 $29,160 $29,160 5.1 $25,832 4.5
Ram 3500 11,000 $32,610 $32,610 5.7 $26,522 4.6
Ford            
Econoline E350 Van 9,500 $24,460 $24,460 4.3 $24,892 4.4
Econoline E350 Pass. Wagon 8,700 $27,590 $27,590 4.8 $25,518 4.5
Excursion 8,900 $43,650 $43,650 7.6 $28,730 5.0
Expedition 6,650 $37,185 $37,185 6.5 $27,437 4.8
F150 Styleside 6,500 $28,345 $28,345 5.0 $25,669 4.5
F250 Super Duty 9,900 $28,950 $28,950 5.1 $25,790 4.5
F350 Super Duty 11,200 $30,110 $30,110 5.3 $26,022 4.6
GMC            
Safari AWD Pass. Van 6,100 $27,620 $27,620 4.8 $25,524 4.5
Savana Pass. Van 3500 9,600 $30,525 $30,525 5.3 $26,105 4.6
Sierra 1500 6,400 $31,170 $31,170 5.5 $26,234 4.6
Sierra 2500 8,600 $32,161 $32,161 5.6 $26,432 4.6
Sierra 3500 11,400 $33,270 $33,270 5.8 $26,654 4.7
Sierra Denali 7,200 $44,255 $44,255 7.7 $28,851 5.0
Yukon Denali 7,200 $44,695 $44,695 7.8 $28,939 5.1
Hummer            
H1 10,300 $111,845 $107,107 18.7 $42,369 7.4
H2 8,600 $50,590 $50,590 8.9 $30,118 5.3
Isuzu            
Ascender 6,400 $34,197 $34,197 6.0 $26,839 4.7
Land Rover            
Discovery 6,064 $37,995 $37,995 6.6 $27,599 4.8
Range Rover 6,724 $71,865 $71,865 12.6 $34,373 6.0
Lexus            
GX470 6,000 $45,700 $45,700 8.0 $29,140 5.1
LX470 6,860 $64,800 $64,800 11.3 $32,960 5.8
Lincoln            
Aviator 6,210 $43,387 $43,387 7.6 $28,677 5.0
Navigator 7,450 $51,960 $51,960 9.1 $30,392 5.3
Blackwood 6,780 $52,500 $52,500 9.2 $30,500 5.3
Mercedes            
G-Class 6,834 $84,500 $84,500 14.8 $36,900 6.5
M-Class 6,283 $51,970 $51,970 9.1 $30,394 5.3
Nissan            
Pathfinder Armada 6,800 $37,600 $37,600 6.6 $27,520 4.8
Titan 6,486 $28,950 $28,950 5.1 $25,790 4.5
Porsche            
Cayenne 6,790 $73,165 $73,165 12.8 $34,633 6.1
Toyota            
Land Cruiser 6,860 $53,915 $53,915 9.4 $30,783 5.4
Sequoia 6,600 $38,080 $38,080 6.7 $27,616 4.8
Tundra 6,200 $23,835 $23,835 4.2 $24,767 4.3
Volkswagen            
Touareg 6,200 $38,415 $38,415 6.7 $27,683 4.8
* Years of fuel assume $2,000 annual; tax savings based on 35% tax bracket. Sources: Taxpayers for Common Sense, The U.S. DOE's Fuel Economy Web site



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