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> http://www.washingtonpost.com/wp-dyn/articles/A60849-2002Dec31.html
>
> Luxury Tax on Cars Comes to an End
>
> By Albert B. Crenshaw
> For shoppers still in the market for a fancy car, the holidays just got a
> little brighter -- the federal luxury tax on automobiles went out with the old
> year.
>
> The tax, enacted in 1990 as part of a package of taxes on "envy items,"
> including boats, furs, jewelry and airplanes, has long been a thorn in the
> side of high-end car dealers. The levy originally amounted to 10 percent of
> the amount by which a car's price exceeded $30,000. Congress backtracked in
> 1993 and repealed the tax on the other luxury items after being blamed for the
> collapse of the pleasure-boat industry. But cars continued to be taxed.
>
> The tax raised $400 million to $450 million most years, hitting a high of
> about $530 million in 1996, said David Regan, executive director of
> legislative affairs at the National Automobile Dealers Association.
>
> Some dealers were outwardly unconcerned about the tax, arguing that for
> wealthy clientele the $1,800 that the tax would have added last year to the
> price of a $100,000 car was little more than a minor annoyance. But others
> conceded that they often had to eat some or all of the tax to close deals.
>
> That was one reason "we had problems with the tax," said Regen. "The burden of
> the tax was really falling on small-business dealers as well as the consumer.
> It wasn't good tax policy."
>
> The industry persuaded Congress in 1996 to end the tax. Because of concerns
> about lost revenue, it was phased out, with the tax lowered as the threshold
> for its application was raised to $40,000. Revenue fell as the phaseout
> progressed, and it would have raised about $200 million this year had it
> remained in effect, Regan said.
>
> Last year the tax applied to about 700,000 vehicle sales, according to the
> dealers association.
>
> Regan and other auto industry experts said the end of the tax couldn't have
> come at a better time for the industry and the economy, which continues to
> sputter.
>
> "This year's 3 percent would add $1,200 to the cost of many high-end luxury
> cars" and sport-utility vehicles, said Paul Taylor, chief economist of the
> dealers association. "That amount coming off the transaction price in 2003
> provides an impact of nearly the same magnitude as a $1,200 cash rebate. Just
> as cash rebates and other incentives helped luxury-car sales in 2002, the
> repeal of the luxury tax should help boost sales in 2003."
>
> In addition, some buyers of the largest SUVs -- those over 6,000 pounds -- now
> have another tax benefit as well. Last year's Job Creation and Worker
> Assistance Act allows a bonus depreciation write-off for light trucks, which
> SUVs technically are, when they are used in business. In some cases, this
> would allow the buyer to deduct more than half of the vehicle's cost in the
> first year.
>