NY luxury tax cars
WASHINGTON, June 16— The Senate Finance Committee voted today to kill the luxury tax on expensive yachts, planes, furs and jewels, and to extend a dozen special tax breaks 18 months.
Renewal of the tax reductions would be financed by selected tax increases on corporations. The tax breaks are popular, and passage of the extensions is generally expected. Those allowed to take advantage of the breaks include the self-employed, workers who receive education assistance from their employers and investors in low-income housing.
The panel agreed to retain the luxury tax on high-priced cars, and said owners of diesel-powered recreational boats should bear most of the bill for ending the other taxes. Although exempt now, they would have to pay the 20.1-cent-a-gallon diesel-fuel tax. 'A Total Disaster'
"This luxury tax has been a total disaster in every respect, " Senator John H. Chafee, Republican of Rhode Island, said in urging repeal.
The tax has been under attack since it was enacted in 1990 to get more money from upper-income Americans without raising income-tax rates. Opponents say the soak-the-rich idea backfired by cutting demand for luxury items.
The luxury tax had been predicted to raise $25 million in 1991 - it actually brought in $98.4 million - and $1.5 billion over five years. Nearly 90 percent of the money has come from sales of cars costing over $30, 000.
Under the committee's bill, the tax on cars would remain, but the $30, 000 threshold would be raised each year to adjust for inflation.
The remainder of the 10 percent tax would be eliminated retroactively to Jan. 1. It applies to the portion of the sales price above $250, 000 for private planes, $100, 000 for yachts and $10, 000 for jewels and furs.
Repeal of most of the tax and extension of the tax cuts were included in a bill that Congress passed in March that would have raised income taxes for the richest 1 percent of taxpayers. It was vetoed by President Bush.
But the new bill has nothing very controversial, and it generally has the support of the Bush Administration. During Senate debate, it may be made even more to the President's liking; an effort probably will be made to attach to it some of the provisions Mr. Bush proposed in the wake of the riots in Los Angeles.
The bill extends through Dec. 31, 1993, a dozen provisions that otherwise would expire June 30. Renewal is expected to cost $6 billion.
Among the provisions are those allowing workers up to $5, 250 of employer-provided education aid a year with no tax liability; permitting the self-employed to deduct 25 percent of their health-insurance costs; giving businesses a credit for more research spending, and giving investors incentives for building or rehabilitating rental homes for low-income people.
The provisions would be financed by:
* Allowing businesses this year to make 75 percent settlements of old disputes with the Internal Revenue Service over the value of deductions claimed for good will, customer lists and other intangible assets acquired in taking over another company.
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