Tax Breaks For Hummers

Tax break has Hummers rolling off lots

David J. Cieslak
The Arizona Republic
Jan. 1, 2004 12:00 AM

Here's the perfect way for a Valley business owner to truly ring in the new year:

Buy a shiny new Hummer or a fully loaded Cadillac Escalade, then get a hefty tax deduction on the monster vehicle, all compliments of Uncle Sam.

Dozens of wide-eyed customers packed into the Valley's Hummer and Cadillac dealers on New Year's Eve to take advantage of a federal tax windfall allowing them to buy the oversize gas guzzlers and deduct the purchase from their 2003 tax bills.

Dealers said they were selling more than double the average daily number of the specialized vehicles, with much of the rush coming as their doors were set to close.

"We're selling a ton of cars, and everybody's having fun," said Bob Monahan, sales manager for Lund Cadillac Hummer Saab in Phoenix, who watched 35 Hummers and Cadillac Escalades roll off his showroom floor Wednesday.

"It's been great for everybody," said Monahan, who estimated his average daily sales at 15 vehicles.

The deduction for business owners, approved in May by President Bush as part of his federal tax-cut package, gives a deduction of up to $100,000 for new or used vehicles that weigh more than 6,000 pounds. Aside from Hummers and Cadillacs, the choices ranged from the Dodge Durango and the Ford Expedition to the Lincoln Navigator and the GMC Yukon.

Dealers across the Valley pledged to stay open late on New Year's Eve to handle the rush of customers, many of whom came straight from their accountants' offices after receiving advice about the tax deduction.

"Most of these people have done a lot of research to make sure they qualify for the program, and now they're coming back and buying the vehicles," said Eddie Espinosa, general manager of Kachina Cadillac Hummer Saab in Scottsdale.

Phyllis Tsai, 27, drove to Scottsdale from Snowflake to buy a new Hummer H2. Tsai, whose boyfriend owns a motel in the northern Arizona community, said they jumped at the chance to own a Hummer after realizing the 2003 write-off deadline was Wednesday.

"To me, a vehicle is a vehicle, but my boyfriend was really excited about it," said Tsai, who was the last customer at Kachina before the dealership closed shortly after 8 p.m.

But to Dave Bresnahan, the Hummer is much more than just a vehicle. In the eyes of his three sons, buying the "sunrise" orange Hummer for $55,000 made him the hippest dad in the Valley.

"I bought it mostly because my boys think it's cool, and I'm a boy who thinks it's cool, too," said Bresnahan, 42. "It's awesome. I feel like a king."

Bresnahan, vice president of Lex International, which sells customer-retention products to car dealerships, said he knew about the tax deduction for six months but didn't make a decision until New Year's Eve, when he drove by the Kachina dealership in Scottsdale.

"I didn't go in thinking I was going to buy anything, but I walked out with one," Bresnahan said.

The windfall doesn't come without a price for the government. One expert estimated that if 100,000 people utilize the loophole, it will cost the country about $1.5 billion in tax revenue.

Lawmakers earlier this year upped the deduction amount from $25,000 in the hopes it would encourage businesses to invest in new equipment sooner.

The deduction is available for tax years 2003, 2004 and 2005.

Dealers say the tax break encourages people to buy cars, which contributes to a healthy economy.

"Our customers are speaking to their accountants and making a good business move at the end of the year," said Greg Schamp, new car sales director of Coulter Cadillac and Oldsmobile in Phoenix. "It's a good time to be a Cadillac dealer."