The US Senate last night voted to include a tax break for Americans buying a new car in 2009 as debate over its economic stimulus package continued.


The amendment would allow individuals buying a new car using financing to write down any interest payments they make during the year, Dow Jones reported, adding it would also let people deduct the state excise tax they pay on the purchase from their tax liabilities.


The bipartisan amendment was introduced by Democrat Barbara Mikulski of Maryland and Republican Sam Brownback from Kansas and approved 71 to 26.


Mikulski said the average family would save US$1,553 on a $25,000 new vehicle purchase as a result of the amendment which would add an additional $11bn to the cost of the stimulus bill, bringing the total of the senate version up to around $895bn, according to the latest Congressional Budget Office estimate.


“Everyone wants to save auto manufacturers, but no matter how much government aid we give to the Big Three automakers, they can’t survive if consumers don’t start buying cars,” Mikulski said in the senate. “That’s where my amendment helps.”

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There are several tax provisions in the legislation aimed specifically at the auto industry, and also wider measures that the sector would be able to benefit from, Dow Jones reported. There are also funds allocated to upgrade the federal government’s car fleet to more environment-friendly vehicles.


But the measure would be the only attempt in the stimulus legislation to tackle the demand side equation of the US auto industry, which has been decimated over the last 12 months, the report noted.


US sales fell 39.4% year on year in January to 655,226units – a 27-year low and, for the first time ever, below China. A predicted seasonally adjusted annualised 9.57m units would be the lowest since June 1982, analysts said, and smaller than 2009 new car sales in China of more than 9.8m units projected by the China Association of Automobile Manufacturers.


The report said the senate amendment would give tax savings to car buyers earning $125,000 or less, with a cap for families at $250,000 and would only apply to the first $49,500 of the vehicle’s purchase price. It would be available for new cars purchased between 12 November 2008 and the end of this year.