Posted on 08/28/2009 7:31:39 AM PDT by NCjim
This is hilarious:
But many of those cashing in on the clunkers program are surprised when they get to the treasurer's office windows. That's because the government's rebate of up to $4500 dollars for every clunker is taxable.
"They didn't realize that would be taxable. A lot of people don't realize that. So they're not happy and kind of surprised when they find that out," Nelson said.
The amusement here is how most (if not all) states compute sales tax (charged when you register the vehicle.)
When you buy a new car you pay tax on the difference between the new car's purchase price and the trade-in you present to the dealer. This is an intentional distortion in the law that is intended to favor dealers over private-party used car sales; if you sell your used car privately the new buyer pays sales tax but you do not get the offset on the purchase of your replacement vehicle - the only way to get that is to trade the car.
Dealers use this, of course, in negotiations, effectively pocketing the sales tax - and why not? It's a real difference to you!
But the "cash for clunkers" is not a trade-in. That's a $4,500 check from the government, basically.
So you get nailed at least once and possibly twice. Specifically, you pay sales tax on the full vehicle price (effectively paying sales tax on the $4,500!) and what's worse those states that tax income (that would be most of them!) might wind up counting this as income for state income tax purposes too, effectively taxing you twice.
I should have probably done a Ticker on this originally, but I (naively) believed that most people understood how the tax system works when it comes to new and used car transactions. Apparently, from the referenced news article, this is not the case, and I bet the car dealers, incredibly ethical people that they are, were fully informing their suckers, er, clients of this little "feature" of that government handout too.
PS: I have also received several emails informing me that dealers had customers so giddy over the "free cash" that they were selling cars at full sticker price besides - effectively, in many cases, turning the entire "cash for clunkers" money into pure dealership profit and managing to charge you tax (twice) on it as well. Ain't car dealers grand (several grand out of your pocket, that is!)
Unless you have money to throw around, it makes no sense to buy a brand new car off the lot. Sure it's nice to have that brand new smell, and squeaks and rattles never heard by anyone but you.
But you can save thousands buying a year old (or even less) car, which may even still have that new car smell. Alternatively, you can buy new car smell air freshener and spray it in the car to make you feel better.
If you take your time and shop around, watch the buy and sell papers, you can find a fantastic deal, and use that extra ten G's or so you'd have otherwise paid for the salesman and dealerships commission and buy a second slightly used car.
Government takes nothing up the butt, just us. Enough said. Wake up America!!!!!
Why does anyone expect anything of benefit to come from the government?
People are stupid generally. They think they got a good deal because they got a $4500 rebate. When in reality they probably didn’t negotiate with the dealer and overpaid by $2000 for the car, and in some cases got rid of a $2500 used car with 3 or more years of useful life in it, then paid 6% sales tax on the rebate amount, and of course now are stuck with a $300 or more car payment, plus higher insurance costs on a new vehicle, which probably offsets the gas savings. They would have been better off putting away $300 per month over the next three years and paying cash for a good 2-3 year old car when their current car dies.
Cash for clunkers is an auto/dealership/bank bailout, and political payback for green weenies, at taxpayer expense, while also hurting the gullible consumers and hurting the supply of used cars and parts. Cluster phuck.
Exactly. In the midst of the furious pursuit of the clunker-to-new-car enthusiasts, I bought a year-old low-mileage auto for much less money than the new-minus-$4500 prices.
I was a Buick dealer for many years. Although I realize that pointing out facts to the ignorant is a colossal waste of time, I’ll give it a try. First of all, dealers do not “pocket” any sales tax. They collect it and turn it over to the state. Period. Nor do dealers “gloat” over taxes owed or paid by car buyers. Only someone as vapid as you, could possibly think of a reason as to why they should WANT to! Taxes are “profit for the state”, not for the dealer. I have no idea what you do for a living—if ANYTHING—but as a rule, anti-free enterprise zealots such as yourself are certainly not involved in anything resembling capitalism. It’s likely you are either an attorney or a state employee (on the off-chance that you do have a job.) And here you are, on a conservative site doing the standard work of the left—creating animosity for those in business. Successful dealers pay more in taxes in a year than you will in your lifetime. So naturally they must be criticized, demonized for that success. And by the way, the vast majority of dealers have yet to be PAID by Hussein and his thugocracy, a fact which I’m sure will delight you no end. Should you ever seek gainful employment please remember that only PROFITABLE businesses will be able to hire you. Naturally that will all change when your hero finally owns/runs everything, at which point you can contact Obama directly and join the SEIU.
I smile at you, because my first car was a 1950 Buick Special Sedanette, straight eight, Dynaflow. What a beauty! I will never forget it.
Hopefully the auto dealers were astute enough to have a clause in the sales contract such that if the government failed to reimburse them for the $4500, it is collectible from the buyer. I’m betting that a lot of buyers have not thought about that second shoe dropping.
And just think how nice it will be when our health care is run by the same government who brought us the cash for clunkers program.
Be very afraid... I am!
ping
Exactly, a youngster in my office got taken in by this. Wish he would have talked to some of us first, we could have helped him avoid this thing.
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