Just because it’s legal, doesn’t make it right
- by Admin
- November 7th, 2015
November 7, 2015
There are many social and political divisions in the US today and the media seems to find subtle ways to exacerbate the problems that divide us by juxtaposing issues in the same print or stories that stir up one or both sides. And there is nothing that can get people worked up more than issues of perceived economic inequality.
For example. Recently a reputable news source splashed an article on their front page claiming that that Tesla SUV buyers can take advantage of a large tax break if the vehicle is used for business purposes. A nearby article announces that there will be no Social Security cost of living adjustments this year ironically as a result of low gas prices. However, recipients of SS can expect an increase in their healthcare costs, some to the tune of 50%!
What’s wrong with this picture? It shouldn’t matter which side you are on—this should make you a little squeamish. How does the person who can afford a $100K+ car get a tax break on the purchase of a luxury car, but an elderly retiree or disabled person will be asked not to expect a small increase in their monthly income?
Now you may be saying, “The guy who can afford a Tesla earned the right to buy one and the elderly or disabled person should have planned better for retirement or emergencies.” I agree with the first, but we all know that “stuff happens” and those relying solely on SS or disability could very well have been wiped out due to medical costs or economic disaster. Let the guy buy the over-priced car. The point is that the tax code is rife with language that makes it easy for people to legally misconstrue the intended purpose. Just because certain things are legal, doesn’t make them right.
First let’s look at the loophole that is allowing for the Tesla tax break. How does an SUV qualify for a credit? It comes from Section 179 of the IRS code. It was originally designed as part of a 2008 stimulus package to encourage small-business owners and farmers to spend on heavy equipment—forklifts, trucks, tractors, etc. The deductible was limited to passenger vehicles weighing more than 6,000 pounds so most passenger cars and light trucks could not qualify.
Suddenly it became a status symbol to drive enormous vehicles—the bigger the better and gas prices were relatively low at the time at about $1.88 a gallon. The deduction became known as the “Hummer tax loophole” because it gave write-offs to people buying Hummer military style trucks—no fuel efficiency or environmental concerns back then.
Because the new Tesla Model X weighs in at just over 6,000 pounds, the owners of the Model X will benefit from Section 179. With a sticker price of around $100K, the $25,000 federal tax deduction, plus a $7,500 federal tax credit, and, in some states, up to $2,500 rebate will have the new Model X owners smiling. But wait, there’s more! Regulations allow eligible taxpayers to depreciate what’s left of the price over five years adding an additional savings of around $4,000.
Now back to the retirees. If you are one of the 70+ million Americans who will be affected by the government’s decision not hand out cost of living increases, I’m guessing you also won’t be driving a Tesla out of the showroom. The problem at this end of the spectrum is that while gas prices and other energy costs helped lower the consumer price index, that’s not what seniors spend their money on. Talk to them about health care, prescriptions, food, and housing—that’s where the prices have increased. On the bright side, since there was no Cost of Living Adjustment (COLA), there will be no increase in Social Security taxes.
So, 60 million retires (many who never recovered from the recession and would like to keep working if they could find a job), disabled workers, spouses, children; 4 million disabled veterans, 2.5 million federal retirees and their survivors, and over 8 million people who receive Supplemental Security Income are pretty much out of luck. Just saying that you can kind of see why the country is divided on the issue of haves and have nots.
The tax code is a mess, filled with loopholes, but sooner or later it bites us all. May as well take advantage when we can, but it still doesn’t feel right.
And for the Tesla buyers–live it up now because you never know—you may be one of those Social Security recipients looking for that COLA down the road!