It seems many of those who took advantage of the 'Cash For Clunkers' program didn't think about the tax implications.
Yep. That US Government rebate of $3,500 or $4,500 is counted as cash in your hands, thereby attracting at least State income tax, if not Federal as well (I don't know if C.F.C. money is exempted from Federal taxation). Furthermore, it's not treated as a trade-in for purposes of sales tax. If you traded in your old vehicle in the normal way, and got (say) $4,500 for it, that would be deducted from the total price of the new vehicle you wanted to buy, and you'd pay sales tax on the difference. On the other hand, if you take Cash For Clunkers money instead of a trade-in, that doesn't get deducted from the retail price of your new vehicle, and you pay sales tax on the entire amount.
For folks in more-highly-taxed states, this combination may mean that they have to find several hundred dollars out of their own pockets to pay for the 'help' that Uncle Sam handed out so generously. I'm sure they're really happy about that.
Karl Denninger adds a final observation:
I have also received several emails informing me that dealers had customers so giddy over the "free cash" that they were selling cars at full sticker price besides - effectively, in many cases, turning the entire "cash for clunkers" money into pure dealership profit and managing to charge you tax (twice) on it as well. Ain't car dealers grand (several grand out of your pocket, that is!)
Why am I not surprised to hear this?
Moral of the story: Beware of a socialist Uncle Sam bearing gifts!
Peter
2 comments:
from:
http://www.cashforclunkersfacts.com/bill-faq/
Q: Is the value of the voucher tax-free to the consumer?
A: Yes. The CARS Act expressly provides that the credit is not income for the consumer. However, the credit will be considered as income for the dealer.
This is a stupid program. Written by idiots with the economic understanding of a turnip.
Encourage people who have a presumably paid off car to get into a new vehicle with a big monthly payment, adding to their debt load in a tough economic time. "Where the mortgage money , honey?" Uh, see that new car in the driveway....."
Wonder how many of these will end up repossessed?
Draw car demand forward for a one time jump, thus LOWERING demand through the next few years by the number of cars sold now.
Destroy the available base of inexpensive used cars for the less wealthy among us.
Destroy the PARTS value of the "clunkers", thus raising the cost of repairing an older car.
This program is typical of the "something for nothing" idiocy that has corrupted us on so many levels.
So what is the next step? Shall we burn down our paid for homes, so the Government will give us 10% of the replacement cost and a loan, so we can have a new one built, in order to keep construction workers employed?
@#$%&* IDIOTS!!
And these are the ones we are supposed to trust to come up with a health care plan?!
My good friend sent me this, I do not know the attribution-
"Let me get this straight.
We're going to pass a health care plan
written by a committee whose head says he doesn't understand it,
passed by a Congress that hasn't read it but exempts themselves from it,
signed by a president that also hasn't read it, and who smokes,
with funding administered by a treasury chief who didn't pay his taxes,
overseen by a surgeon general who is obese, and
financed by a country that's nearly broke.
What possibly could go wrong?"
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