Surprise! There’s A Cash For Clunkers Tax

Today’s theme is brought to you by the word “consequences.” When dealing with Democrats/liberals/progressives, there are always consequences, the majority of which were never considered when calling for and/or implementing legislation/plans. Another case in point (h/t Blogs For Victory)

The Cash For Clunkers program is adding to the activity at treasurers’ offices all around South Dakota. First, people were asking for proof of ownership, so they could show they owned their vehicle for a full year, allowing them to cash it in. Now, they’ll be returning to register their new vehicle.  And when they do, new owners need to bring every bit of paperwork provided to them by their dealer.

“That means they need their title, their damage disclosure, their bill of sale and the dealers have 30 days to get that to them,” Minnehaha County Treasurer Pam Nelson said.

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.


On the front end, CFC sounded great. Stimulate people buying auto’s in the private market by offering rebates, because money circulating in the economy is a good thing. Though, of course, Dems linked this with AGW and made people purchase a more fuel efficient vehicle. You know, a Hummer to a Dodge Ram. But, alas, the consequences rear their ugly heads

  • people have to pay tax on the rebate
  • fewer used vehicles, meaning fewer cars on lots, meaning fewer sales, meaning less commission for the sales people and dealerships
  • fewer used vehicles, which harms the middle and lower classes who would typically purchase them
  • Dealers not getting their money back because of burdensome and onerous government paperwork
  • less money passing through the economy because there are fewer used cars to sell

What are some of the others y’all can think of?

More: here’s another consequence. The top 10 cars destroyed under CFC are all American brands. What do American auto parts makers and sellers now do?

Double more: I should point out that the CFC program prohibits the rebate from being added to your federal tax return, and some States make heavy use of the adjust gross income number from said federal return. North Carolina does. However, States can still consider the rebate taxable income, as can local government. Not to mention that the car dealers can be hit by states by saying that the rebates are taxable income. Also, there could even be a taxable gain if the rebate is worth more than the value of the traded in vehicle.

People also had to pay sales tax on the rebate, depending on the locality. Even the Feds have no idea whether a CFC purchaser will have to pay state or local taxes.

Crossed at Right Wing News and Stop The ACLU

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5 Responses to “Surprise! There’s A Cash For Clunkers Tax”

  1. donatmsu says:

    The cash for clunkers program is the ultimate example of a broken window fallacy. It seems like it has created economic activity, but in reality that activity is at the expense of previously created wealth (cars with life time still viable on the roads). The whole program is an economic fruad.

  2. Kstan says:

    Taxable how:
    Federal income tax?
    State income tax?
    Local income tax?
    State sales tax?
    Local sales tax?
    ad valorem property tax?

    It could be any or all of them.

  3. Got that right, donatmsu.

    Regardless, Kstan, it is a tax. Surprise!

  4. Trish says:

    How about the faithful ad nauseum tax?

  5. Generic Dreams says:

    Are you kidding me just because I took advantage of that trade in deal I gotta pay more tax??no way that’s right -are you saying that the government has somehow deemed that my running and insured very nice, only older, car was not worth anything so I get no credit for the fact that I could have just traded my car in and not used that program and may have only gotten a slightly less trade in value than 4500.00 that I got and then not had to worry about any further tax implications.My contract shows my car trade in added together with the cash down payment i also gave,it does not separate them.

    I should not be surprised though as I feel the governments shaft going in deeper every day now.

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