A Senate bill would level the playing field in tax policies that give bigger breaks to small business owners who buy large SUVs than those who buy environmentally friendly vehicles like hybrids.
The Republican chairman of the Senate Finance Committee and the panel’s ranking Democrat proposed the incentives, which would cover hybrids, electric cars, lean burn diesel and natural gas. Only hybrids have gained a noticeable U.S. market share.
Vehicles powered by ethanol and ethanol-gas blends, which U.S. vehicle manufacturers are promoting this year, are not included. Those fuel options are covered in other tax provisions.
Small business owners now get up to $3,150 in tax credits for buying a hybrid, just like anyone else.
The new proposal would allow eligible alternative fuel vehicles to get the same tax deductions of up to $25,000 for SUVs weighing more than 3 tons.
That provision has long been criticized by environmentalists who say it rewards business people for buying gas guzzlers like the Hummer or Ford Excursion. Car dealers and small business owners say the SUV breaks help businesses and automaking, a key part of the economy.
The amount a small business owner gets back from the $25,000 deduction depends on tax bracket. Those in the 35 percent bracket, for example, would get $8,750.
The proposal would also speed depreciation and allow businesses to expense up to $100,000 for their alternative fueled vehicles.
“The tax code shouldn’t favor SUVs over alternative energy cars for business owners,” said Sen. Charles Grassley, an Iowa Republican and chairman of the Finance Committee.
Montana Sen. Max Baucus, the panel’s top Democrat, said Congress should do what it can to encourage the purchase and use of alternative fueled vehicles.
“America’s small business owners are looking for ways to reduce their energy consumption and costs and the tax code should provide benefits for those who can choose and use clean, lean alternative fuel vehicles,” Baucus said.
President Bush said in January the United States is “addicted to oil” and needed to boost investment in alternative fuels to lessen dependence on imported petroleum.
Gasoline demand accounts for roughly 40 percent of U.S. daily oil consumption.
Struggling U.S. auto manufacturers, such as Ford Motor Co. and General Motors Corp. plan to invest more in hybrid and other alternative fuel technology, but they lag behind foreign manufacturers in production of popular hybrids.
A Consumer Federation of America analysis this week showed that an increase of 5 miles per gallon in fuel efficiency of the U.S. domestic fleet would save about 23 billion gallons of gasoline each year. That would reduce imports of oil and oil products by an estimated 14 percent.
Hybrids can get more than 50 miles per gallon combined city and highway driving compared with some large SUVs, which achieve between 15 mpg and 20 mpg, the CFA said.