June 28, 2007 — -- Shed a tear for luxury SUV owners.
Because they're on the verge of losing a perk that comes with purchasing a Hummer or a Cadillac Escalade -- getting a $25,000 tax deduction.
It's one of the many loopholes buried within the fine print of the tax code: Business owners who purchase heavy luxury SUVs, those weighing over 6,000 pounds, get to take deductions up to $25,000.
Now some members of Congress are pushing to close the so-called Hummer Tax Loophole. Led by Rep. Earl Blumenauer, D-Ore., the Ways and Means Committee passed an energy bill last week that is expected on the House floor next month.
"We're allowing people to buy a huge expensive gas guzzler and get a benefit that was never intended for them," Blumenauer told ABCNEWS.com.
He explains that the provision in the tax code was originally intended to allow farmers and small-business owners to recover the cost of buying trucks and heavy-duty working vehicles. "But that was before the explosion of huge SUVs like Cadillac Escalades and now we're providing a tax break for a luxury car."
Blumenauer said that the new bill includes provisions for legitimate business use by exempting farm vehicles, vans, flatbed trucks and school buses from the closure of the loophole. He predicts that the provision will give back to the government about $750 million over five years, which will be used to promote conservation and alternative energy.
Supporters of the provision, including the Natural Resources Defense Council and Taxpayers for Common Sense, argue that it's a much-needed correction to a egregious loophole in the tax code.
"The purpose initially was to help farmers but the problems grew in how it was being exploited," said Keith Ashdown, vice president of Taxpayers for Common Sense. "Tax credits are steroids. If you get a $25,000 tax credit for anything, you can get people to listen to Journey again."
Ashdown notes that taxpayers were originally allowed to deduct up to $100,000 for the purchase of such a heavy vehicle but that provision was narrowed down by former Sen. Don Nickles in 2004.
Among the provision's strongest opponents are automobile manufacturers and dealers who argue that repealing the exemption amounts to a tax increase.
"It's an unwarranted tax increase on small businesses," said Bailey Wood, spokesperson for the National Automobile Dealers Association, noting that the exemption list is not that complete.
"Many in the construction business, landscaping and service trades use SUVs as a workhorse for their business. We obviously oppose it because it would affect purchasing decisions made by business owners."