Friday, December 12, 2008

Blue Detroit - By Jimmy Petrol

Like the man said, we can count on just death and taxes; everything else is a crap-shoot. But tax law is really what we count on. Want to see an economic sector boom, or a product type become ubiquitous? Just enact a tax break that makes it attractive and money will flow like Venezuelan oil. The results are sure enough that even the gals at the psychic hotline can see them coming. Obtuse? Not really, just under-reported.

The American SUV habit is a direct result of a tax law. Here's how. There are precious few places a working stiff can spend money that will shield it from taxation, or said otherwise, move the money spent from the taxable to the un-taxable column on the simple, easy to use, income tax worksheet. For businesses, of course, business expenses are all deductible and only profit is taxed since net profit is really the businesses's income. So a business is encouraged to buy things that it can deduct from its income line like tools, equipment and materials. This naturally results in more sales of these same things and the old economic engine purrs along, selling lots of stuff to business.

Somewhere along the way, business large and small got allowed to write-off a business vehicle. Not just any vehicle....only the ones that weighed more than 6,500 pounds.

Now, running a business is a busy thing, and busy business owners log many, many hours behind the wheel, jetting about town trying to sell a contract, close a deal or chase a rainbow. This is a natural thing for the budding tycoon and can't be helped (unless we invent some wild, wacky thing like the "telephone"). This means that the business mile is a write off, no matter what kind of car is the eco-minded business owner might want to drive a small car to business appointments.

Not so. The guys that need trucks (blue-collar businesses) have trucks, whether they get to write of just the mileage or the whole shebang (payments, repairs, gas). They have to have vehicles that are heavy. And realtors like to make the appearance in style...a big, roomy Cadillac was the realtor's choice before the advent of the SUV. Lots of other business owners like to drive impressive, large vehicles; American customers respond well to businesses that appear affluent.

So the tax law begat SUV owner after SUV owner, who begat a craving for the large and luxurious in the commoner, whose families all loved the idea of cruising about in land yachts, not eco-cars...and the gas cost little enough for the affluent, stylish Americans who bought them.

Detroit's razor-sharp accountants quickly discovered that the automakers made more profit on an expensive car, per unit, than on a little, economical car. So, true to the accounting principles that have made the rich so terribly rich in America, they lobbied for the tax incentives that led to the SUV craze. They made money more efficiently, from an accounting point of view.

Meanwhile, the globe got hotter. The European, Japanese, Korean and even German automakers worked hard to promote fuel-efficient cars even while their governments recognized global warming and the Bush administration called it all "bad science". The Americans clamored for larger and larger cars and got ‘em. Simple supply and demand? Not hardly; the Federal Government created and sustained the profit-driving production of SUV's while it might have promoted just the opposite.

Now the government is self-righteously chastising Detroit for such short-sighted stratagem. Where are the fuel-efficient cars American people want (suddenly)? What fools have been minding the store? And Detroit is playing along, hat in hand, confident of easy money where they have gotten easy tax-laws for years. Hand in hand, the automakers and the prodigious intellects that people our Congress are pretending that this whole thing is just bad judgment on the part of short-sighted automakers and the consumers that begged for big, silly cars.

What Detroit has missed is that they can go right on along making and selling those obscene planet-busters they call SUVs; just not to Americans. They market is strong in Venezuela, where gas goes for about twenty-five cents per gallon, U.S. Instead of begging for cash, they might better spend their time begging for permission to sell in countries that can afford to run them.

Of course, only if the Detroit accountants, sage and wise men that they are, are sure that global warming isn't just a teensy bit worry-some and maybe just a little bit of the responsibility for it may rest on the automaker. God rest the accountant's soul, whatever shreds He may find to minister to.

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