Fed Tax Break Encourages SUV Purchases

Oct. 1, 2003 — -- Thanks to a generous tax credit, Karl Wizinsky is driving a very large vehicle these days — a 2002 Ford Excursion.

"It doesn't hurt to have a larger vehicle, but I wouldn't say it's a requirement of my business," he said on a cell phone while driving the Excursion. "But I ended up saving $32,000."

This year, the perks of buying a large SUV — if you're a small business owner — got even bigger.

Congress recently passed a tax bill, as proposed in President Bush's economic stimulus plan, that offers a $100,000 tax credit for business owners who purchase any vehicle weighing 6,000 pounds or more when fully loaded.

When Wizinsky's accountant told him about the credit last year, the amount was much less, at $75,000, but it was enough to encourage Wizinsky to trade in his Mercury Marquis for the Excursion.

"It sounded too good to be true," said Wizinsky, a health care consultant in Novi, Mich. "But it was true. So I bought the SUV. For a small company like mine it's a significant credit."

Meanwhile, legislation that offers a much smaller tax break — a $2,000 tax deduction — to those who purchase fuel-efficient hybrid cars is on track to be phased out. Congress is considering legislation that would extend the tax deduction to encourage consumers to buy the hybrid cars, but the status of the bill remains uncertain.

Even though the large vehicle tax credit applies only to the self-employed while the hybrid car tax deduction applies to anyone who buys a hybrid, the stark contrast between the two amounts has environmentalists crying foul.

"You can't fault people for taking advantage of the credit if they're using the vehicles for business — it's a rational choice," said David Friedman, a senior analyst with the Union of Concerned Scientists. "But why should taxpayers' dollars go toward buying bigger and bigger vehicles? Instead, the government should be encouraging people and small business owners to buy fuel-efficient cars."