How to boost auto sales? A tax break


In a move to focus the pending economic stimulus bill directly on boosting auto sales, the US Senate approved 71-26 an amendment by Sen. Barbara Mikulski (D-MD) to allocate $11.5 billion to tax breaks for people who buy new cars. The move came as automakers reported a 37.1% decline in January sales of new cars and light trucks.

“I want to stimulate demand in the automobile industry so that people go to showrooms and buy cars. Why is this a good idea? If you buy a car, someone’s got to make them, someone’s got to sell them, someone has to service them and someone has to provide administrative services. So this amendment is good for the manufacturers, the dealers, the suppliers and the consumers. My amendment is simple. If you buy a new passenger car, minivan, or light truck by December 31st of 2009, you will get a tax deduction for your sales or excise tax and the interest on your loan. A family would save about $1,500 on a $25,000 car, not counting the additional incentives from dealers,” Mikulski said on the Senate floor. The incentives would be available only to families with annual income up to $250,000 and on cars costing up to $49,500.

While you might not think of Maryland as an auto industry state, Mikulski noted that her state has 300 dealerships and auto dealerships employ an average of 53 people in sales, mechanics and administrative positions.

Some Senators from states with major auto manufacturing joined Mikulski and primary co-sponsor Sen. Sam Brownback (R-KS) as co-sponsors of the amendment: Debbie Stabenow (D-MI), Sherrod Brown (D-OH) and Evan Bayh (D-IN). Also onboard were Kay Bailey Hutchison (R-TX), Jim Webb (D-VA) and Robert F. Bennett (R-UT).

In a fact sheet on the amendment, Mikulski noted an urgent need to boost auto sales. To reach viability, she said, the Big Three car makers need to have sales at a minimum of 13 million units per year – and December sales were running 20% below that minimum.

That was before things got even worse in January, with the 37.1% sales decline reported this week. According to the Detroit Free Press, automakers believe retail sales of cars and trucks may finally have hit bottom in January, with the annual production rate dropping to 9.57 million. A least, that’s the hope.

RBR/TVBR observation:
This is certainly a proposal that broadcasters can get behind. If more Americans are going to be able to buy cars, the auto companies are going to have to advertise their wares to claim their share of the business. Also, this idea is politically bipartisan to the extreme. Liberal Mikulski’s chief co-sponsor is arch-conservative Sen. Sam Brownback (R-KS).