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November 15, 2008
Discussion
There is great debate over the ideas being floated to provide economic relief to the US automobile industry. The current level of thinking involves the US Government literally handing over untold billions of dollars of taxpayer money directly to the manufacturers. Maybe this is a good idea, maybe not. However, it is a given that only the US Government has the extraordinary resources and scope of economic control capable of influencing the solutions necessary to handle this massive crisis.
Given this, perhaps there is a more productive and creative way to use government resources, without the government needing to write blank checks, while simultaneously guaranteeing direct tax payer benefit.
The Idea
Rather than direct cash to the manufacturers, I recommend that Congress agree to provide a substantial tax credit to individuals and businesses that purchase a motor vehicle. Here is an example of how it would work:
• The government provides a substantial tax CREDIT on the purchase of a new vehicle. For example, a 40% tax credit on a $25,000.00 vehicle would generate a $10,000.00 tax credit
• This credit would be applied over 4 or 5 years. ($2,000.00 to $2,500.00 per year) The credit provides the buyer with immediate reduction of taxes, which will directly assist in reducing the regular monthly payment burden
• The credit can only be used to purchase vehicles built by the ”BIG THREE” in the United States*
The Resulting Benefits
• The car buyer receives an extraordinary value, which will motivate quick action to purchase motor vehicles
• The manufactures sell millions of cars without having to operate at a loss
• The government does not have to come up with the cash upfront
• The credits can be adjusted to specifically promote certain ancillary outcomes such as, promoting high mileage vehicles, alternative fuels, turn of older inventory, etc.
• The program can be easily monitored, controlled, and or modified rapidly to address changes in economic conditions
• All of the money goes directly back into the economy, unlike the insurance and bank bailouts
** It is important to recognize the fact that management and administration of all foreign manufactures are subsidized to one point or another by their governments already. This proposal simply helps level the playing field.
Idea Offered by:
Dennis S. Kraus
1 Lodge Street
Cranston, RI 02920
401-486-7864 dskraus@verizon.net