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President Barack Obama signed the $787-billion American Recovery and Reinvestment Act of 2009 on Feb. 17. The stimulus bill includes a downsized Auto Ownership Tax Assistance plan and a controversial “buy American” provision.
Congress drastically decreased the Auto Ownership Tax Assistance language, changing it from a Senate-proposed $11.5-billion package down to $1.7-billion in the bill’s final version, which includes tighter limits on who will qualify for the incentive.
The provision creates a new tax deduction for state and local sales taxes paid on new car purchases. A phase-out of the deduction begins with single filers with a $125,000 adjusted gross income and couples with a $250,000 adjusted gross income.
The bill also expands the current tax credits for electric plug-in vehicles to 200,000 vehicles per manufacturer. This consumer tax credit will be 10 percent of the vehicle purchase cost with a maximum credit of $7,500.
The bill passed the Senate by a vote of 60-38 and the House in a 246-183 vote. It will provide tax relief to 95 percent of Americans through $400 rebates for individuals and $800 for couples. It also continues to fund job-loss benefits.
‘Buy American’
The "buy American" provision is sparking debate about protectionism, which was explored during an episode of 60 Minutes on Sunday. Organized labor and small manufacturers influenced passage of an amendment to the package so that more materials used on construction and infrastructure projects are made in the United States.
The amendment requires that only U.S. iron, steel and other manufactured goods be used for public buildings and public works funded under the bill. However, it comes with several exceptions. For example, the bill says that the buy American policy must not violate U.S. obligations under existing international trade agreements. It also does not apply if American goods would increase the cost of the overall project by more than 25 percent. Federal highway, transit, and airport projects already are covered by similar “buy American” requirements.
The “buy American” provision could do more long-term harm than good, according to the U.S. Chamber of Commerce. The chamber and more than 100 companies, including General Electric, Caterpillar and other construction, defense, and high-tech companies, wrote a letter warning Senate leaders that a far-reaching “buy-American” clause "will harm American workers and companies across the entire U.S. economy, undermine U.S. global engagement, and result in mirror-image trade restrictions abroad that would put at risk huge amounts of American exports."
But proponents of the provision, such as the Alliance for American Manufacturing, an alliance of manufacturing companies and the United Steelworkers union, said it’s needed to prevent additional layoffs in U.S. construction and manufacturing.
A White House spokesman said the “buy American” provision is a good compromise that recognizes existing laws and ensures that the “language doesn’t create unnecessary trade disagreements in a time of economic crisis.”
