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Friday, July 2, 2010

Cash For Clunkers Rear Ends Rhode Islanders

Last summer's Cash for Clunkers program artificially boosted used car prices by requiring destruction of the clunkers, thereby restricting the supply of used cars.

That was bad enough for people looking to buy used cars.

But the market distortion caused by government intervention is hitting Rhode Islanders particularly hard.

Rhode Island taxes the value of automobiles (yeah, welcome to our nightmare). The value of the automobile for tax purposes is based on the fair market value at December 31 of the preceding calendar year.

So Rhode Islanders are being taxed this year based on the inflated value of used cars last year primarily as a result of the Cash for Clunkers program.

But it gets worse. Rhode Island used to exempt the first $6,000 of value, but in a revenue raising measure, is allowing municipalities to lower the exemption to $500.

The result is a nasty tax bite for Rhode Islanders who own used cars, as detailed in The Providence Journal:

If you own a car in Rhode Island, be prepared for a shock when you look at your property tax bill....

"My own vehicle went up," said Linda L. Cwiek, chairwoman of the state Vehicle Value Commission, which sets uniform values for tax assessors statewide. She drives a 2007 Jeep Grand Cherokee.

Rhode Island sets the value of vehicles registered in the state based on used car prices at the end of December of the preceding year. Taxes are then calculated as a percentage of that value. That means Rhode Islanders' car taxes are affected by the used-car market.

"There are less used vehicles out there for people to buy," said Cwiek, who also is the tax assessor in North Kingstown. She placed blame for the short supply of used cars on the federal "Cash-for-Clunkers" program.

To stimulate a sagging automotive economy and to aid the environment, the federal program offered financial incentives to turn in older vehicles in favor of buying more fuel-efficient models. In all, the program removed 677,842 vehicles from the road and sent them to the shredder. That prevented them from entering the used-car market.

They never learn, do they? If you liked Cash for Clunkers, you'll love Obamacare.

Related Posts:
Cash for Clunkers Driving Up Prices
We Are All Car Buyers Now

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  1. I have a friend who receives unemployment benefits.

    On his pay stub he receives $22.00 from "Federal Stimulus Funds"

    There is a tax on the "Federal Stimulus Funds". It's $28.00.

    It costs him $6.00 to receive stimulus funds.

    It sounds much like cash for clunkers.

  2. Did you say someting about ObamaCare? From Drudge

    The Obama administration has not ruled out turning sick people away from an insurance program created by the new healthcare law to provide coverage for the uninsured.

    Critics of the $5 billion high-risk pool program insist it will run out of money before Jan. 1, 2014. That’s when the program sunsets and health plans can no longer discriminate against people with pre-existing conditions.

    Administration officials insist they can make changes to the program to ensure it lasts until 2014, and that it may not have to turn away sick people. Officials said the administration could also consider reducing benefits under the program, or redistributing funds between state pools. But they acknowledged turning some people away was also a possibility.

    “There’s a certain amount of money authorized in the statute, and we will do our best to make sure that that amount of money insures as many people as possible and does as much good as possible,” said Jay Angoff, director of the Office of Consumer Information and Insurance Oversight at the Department of Health and Human Services (HHS). “I think it’s premature to say [what happens] when it’s gone.”

    Great Planning don't you think? And now on to spending for broadband and other delights to keep the poor happy and voting for him. Obama IS a weapon of mass destruction.

  3. The Clunker we should have gotten rid of is still in the Oval Office.

  4. What you report is true from my perspective of owning a used car dealership. It has created a shortage of inventory and higher prices.

    Cash for clunkers was a redistribution of wealth from the poorer to the richer.

    It has hurt the working and lower class that depend on used vehicles in the range that were destroyed. It has pushed some into the even higher priced buy here/pay here lots, because what used to buy a car is not a down payment. Buy here lots have always inflated the price of cars contrary to market value because they don't really sell cars, but credit.

    New car sales in our area only seem to rise when incentives are in place. I think that is the new norm of car sales: rebates and incentives.