WASHINGTON - Congressional negotiators closed a controversial tax loophole on Wednesday that allowed small business owners to write-off the full cost of the biggest and most expensive sport utility vehicles.
The auto deduction is part of a long-standing tax provision covering depreciation of business expenses. It was originally intended for farmers and construction workers who need heavy duty vehicles to haul goods and materials.
Lawmakers expanded the popular write-off from $25,000 to $100,000 last year and lifted depreciation schedules to enable taxpayers to take the deduction all at once. This created a huge incentive for anyone running their own business to buy big SUVs, which have skyrocketed in popularity.
Tax fairness, environmental and consumer groups have complained that doctors, lawyers, accountants and other white collar professionals that run their own businesses have taken advantage of the loophole to buy the flashiest sport utilities for personal use. These luxury models can cost well over $50,000.
The critics also characterized the benefit an excessive tax break for the wealthy. The Bush administration urged Congress this week to shrink or eliminate the advantage, despite objections from some Republican lawmakers that doing so was tantamount to a tax increase.
But the final version of a corporate tax bill approved by congressional negotiators on Wednesday rolled back the deduction to $25,000 for most purchases.
The changes allowed tax writers to use the savings to pay for other tax breaks in the reworked legislation that still must be approved by the full House of Representatives and Senate.
REUTERS NEWS SERVICE
