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Lawmakers’ Luxury Tax Boo-Boo

October 2, 1991

NEW YORK (AP) _ Few people will argue that a specially equipped van for a disabled driver constitutes a luxury item.

Yet the current law puts vehicles with wheelchair lifts and hand controls on equal footing with fully loaded, leather-upholstered BMWs, and subjects both to a luxury excise tax.

″It’s clear Congress made a boo-boo when it put together the luxury tax,″ said Doug Cole, executive director of the National Vehicle Conversion Association in Greenfield, Indiana, which represents the 300 to 400 domestic manufactuers that make the special van conversions.

″I’m sure they didn’t mean to include vans for the physically challenged.″

But that’s what happened after the new tax code took effect Jan. 1. An embarrassed Congress is now trying to reverse this side effect.

Under the law, all vehicles costing more than $30,000 are subject to a 10 percent federal tax, including accessories installed within six months after a vehicle was purchased.

Luxury boats and expensive jewelry also are subject to the luxury tax, enacted as part of a deficit-reduction package.

The average price for a van with special equipment for the handicapped runs around $35,000, although the total easily could run much higher, depending on the modifications made, said Becky Plank, who heads the National Mobility Equipment Dealers Association in Tampa, Fla.

So a disabled person who pays $20,000 for a van, plus $15,000 more for special modifications, would be taxed about $500, or 10 percent of the amount beyond $30,000. Someone buying a BMW 325i, which has a base price of $27,990, with options galore, could pay around the same amount in taxes.

Granted, only about 30,000 of these modified vans are sold to individuals each year, said Cole. That’s a tiny fraction of the approximately 12 million cars and light trucks sold domesically.

But most will agree it’s an unnecessary tax burden on many who can least afford it. It also conflicts with the recently passed Americans with Disabilities Act, which protects the disabled from discrimination in transportation, among other things.

″That kind of (conversion) equipment is no more a luxury than brakes are,″ said Sen. Lloyd Bentsen, D-Texas, who is among several lawmakers fighting to modify the tax law.

Sen. Pete V. Domenici, R-N.M., and a ranking member of the Senate Budget Committee, proposed the Luxury Tax Relief Tax Act in February that would exempt vehicles for the disabled from the luxury tax.

He and 54 other senators, who co-sponsored the bill, also tried unsuccessfully in August to get the Internal Revenue Service to act on its own to exempt vehicles for the handicapped.

A similar exemption was included in the proposed Tax Simplification Act introduced in late June by the chairmen and senior Republicans of the House Ways and Means and Senate Finance committees: Reps. Dan Rostenkowski, D-Ill., and Bill Archer, R-Texas; and Sens. Bob Packwood, R-Ore., and Bentsen.

However, both bills remain stalled in the Ways and Means Committee, where all tax legislation must originate.

Congressional sources say an exemption in some form undoubtedly will fly through both chambers, but whether that would happen before year-end is questionable.

Ari Fleischer, Domenici’s press secretary, said the senator was hoping the exemption would be included in a simple technical corrections tax bill, which ″deals with issues unforseen, not of a policy nature.″ In other words: boo-boos.

End Adv AMs Wednesday, Oct. 2

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