Mich. vehicle buyers will get a tax break

Buying a new car? You might want to wait until Dec. 15.
AP Wire
Oct 23, 2013

 

Starting then, you will pay less in sales tax on a car purchase in Michigan because the value of your trade-in can be counted under a deal between lawmakers and Gov. Rick Snyder.

The Legislature began giving final approval to the gradual tax cut Tuesday, and the governor is expected to sign it after the effort had stalled for decades in Lansing.

In the first year, people will no longer pay Michigan's 6 percent sales tax on up to $2,000 of the value of their trade-in, for a savings of up to $120.

The trade-in value subtracted from the sales price will rise $500 a year, which equals an extra $30 tax break per year until it is fully phased in 25 years from now.

Legislators expect most car buyers to be able to credit the full value of their trade-in against the purchase price within six years. Boat buyers can immediately subtract the full value of their trade-in starting Dec. 15.

Michigan is among just six states to make car buyers pay sales tax on the full price without counting their trade-in, according to the Michigan Auto Dealers Association, which has pushed the legislation for years as a way to jumpstart sales. Critics say the existing law is a form of double taxation because buyers previously paid full sales tax on the vehicle they are trading in.

"I'm excited because we're giving something back to the average consumer," said Senate Majority Leader Randy Richardville, R-Monroe. "We're telling people that financially we're in good shape and we're going to share that wealth so to speak a little bit with the people who put the tax money here in Lansing to begin with."

Republicans and Democrats have backed measures to collect the sales tax on the difference in the past, but it has been stymied over concerns about lost tax revenue. The bills would reduce state tax revenue by roughly $20 million in the first year, a third of which is intended for schools. But down the line, the lost revenue would grow to a total of more than $200 million a year once fully phased in.

Michigan briefly allowed a trade-in allowance for new and used vehicles in 1984, but the tax break was ended because of budget problems.

The legislation states that if future lawmakers repeal the recent expansion of Medicaid to more low-income adults, the phase-in of the tax cut will be paused — a provision requested by Snyder's administration. House Speaker Jase Bolger, R-Marshall, said the budget agreement for current budget year included $20 million in tax relief.

The Senate voted 38-0 and the House 101-7 for one bill now headed to Snyder. Another bill was approved 99-9 by the House and is expected to receive final approval from the Senate on Wednesday.

Terry Burns, executive vice president of the auto dealers association, said Michigan customers often ask dealers why people in bordering Ohio, Indiana and Wisconsin get a sales tax reduction for their trade-in.

"This is a very major purchase for our customers," he said. "They will see the tax relief at the point of sale. They don't have any additional forms to fill out. There's no means test. There's nothing."

Comments

SignalMaintainer

Another round of the government and corporations trying to drum up needless consumption. People will ditch their perfectly good, reliable used cars in order to keep up with the Jones', while blowing fiscal responsibility right out the window.

This is like cash for clunkers, where people were more than happy to give the automakers their money while hurting themselves financially.

Not only that, but buying a brand new car is totally stupid. I made that mistake once buying a lemon from Preferred Ford (which they refused to fix any of the recurring problems) after my 2004 Jeep Grand Cherokee started totally falling apart around the drivetrain (which still ran like new) after 330,000 miles. Never again; I will get a good, reliable used car from now on when I truly need one. For now my lemon of a Ford (which just got a new engine two years from being new, paid out of my pocket) will do just fine.

Gotta keep the people from escaping debt somehow...

BTL2A

I highly doubt saving 120 dollars is going to cause people to flock to buy a new car.
I have a hard time following your logic on why a used car is more reliable than a new car. All used cars were new at one point.
So while your used car is still running that means someones new car is still running as well.

Whatareyoutalki...

I only ever buy new.
I purchased a few used cars, and they were crap.

When new I know what I'm getting, and I only buy from 5 star dealers.

I'll keep the economy going while you keep your mattress stuffed.

MarthaCole

Well. That is great news. We all need tax breaks and that will be good. - Sandra Dyche

 

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