Mikulski Proposes Plan to Help Automakers, Consumers

By DAVID HILL
Capital News Service
 

TOWSON - November 12, 2008 -- As the U.S. Senate contemplates a bailout for the nation's ailing auto manufacturers, Maryland's senior senator is proposing a plan to assist car dealers and consumers.

Sen. Barbara Mikulski, D-Md., will introduce legislation during next week's lame-duck session to allow sales tax and loan interest deductions on new vehicle purchases.

The deductions could save buyers thousands of dollars and potentially spike lagging sales, Mikulski said.

"As the American automobile industry goes, so goes so much of our economy," she said. "The best way to help manufacturing is to stimulate demand."

The proposal comes as the nation's three biggest automakers -- Chrysler LLC, Ford Motor Co. and General Motors Corp. -- are asking for more than $50 billion in government assistance.

While the manufacturers are struggling to survive, auto dealerships are also in crisis. Dealership sales made up nearly 20 percent of Maryland's total retail sales in 2007, compared to a national average of 18 percent.

As many as 700 of the nation's 20,700 new-car dealerships will close in 2008, according to estimates by the National Automobile Dealers Association, eliminating an estimated 37,100 jobs. Data on Maryland-specific closures was not available.

"This is the slowest that I've seen the business going," said Mel Bayo, director of sales training and 23-year employee for Mile One Automotive. "I've got a daughter in college and I've also got a mortgage to pay as well. We're worried about the current situation."

Mikulski's plan would be part of a proposed bailout package that would use a portion of October's $700 billion economic bailout to assist automakers.

If signed into law, her plan would allow families earning less than $250,000 a year and individuals earning less than $125,000 to deduct sales taxes and interest on new cars. The interest deduction would only be available on loans of less than $49,500.

The deductions would typically save about $1,553 on a $25,000 car and would be available on any purchase between Nov. 12, 2008, and Dec. 31, 2009, Mikulski said. The estimated cost of the program is about $1 billion to taxpayers.

"The cost of doing nothing is horrendous," Mikulski said. "We cannot let our American automobile industry implode."

The Senate is scheduled to begin its lame-duck session Monday. Lame-duck sessions take place between November elections and January inaugurations, allowing outgoing members -- or lame ducks -- to participate.

Mikulski expects support from Senate Democrats, including Sens. Carl Levin, D-Mich., Debbie Stabenow, D-Mich., and Majority Leader Harry Reid, D-Nev. She is also working to gain Republican support.

"Congress has a sense of urgency to do something to help the automobile industry," Mikulski said. "I believe my plan will be received very well."