Both the car-scrapping and the new-car tax incentive proposals have been around for several weeks, proposed to Congress as stop-gaps against the weakening economy and car market. But with President Obama's support they are beginning to look like spokes in a wheel of industry reform and stimulus.
The basic aim of the tax incentive program, called the Auto Assistance Ownership Amendment, is to offer tax relief on the purchase of a new car - with certain limits. Those making over $250,000 per year or buying a car valued at over $49,500 won't be eligible. The savings could still total thousands of dollars, by making the interest paid on car loans and state sales and excise taxes deductible.
Car scrapping on the other hand offers a dual-pronged approach toward driving up new-car buying: by getting older cars off the streets and offering up to $7,500 in exchange, it creates demand and supplies cash. The success of similar plans in Germany has proved immense, but it remains to be seen if the idea will play out well in the much different car climate found in the U.S.
