NADA Legislative Priorities

July 7, 2021

ELECTRIC AND AUTONOMOUS VEHICLE LEGISLATION MUST PRESERVE STATE VEHICLE FRANCHISE LAWS AND CONSUMER AFFORDABILITY

The key to advancing the consumer adoption of both electric and autonomous vehicles is a strong partnership of vehicle manufacturers and franchised vehicle retailers with a wide and competitive distribution network, which will drive vehicle affordability and consumer demand. Based on the states’ interest to protect consumers, preserve price competition, support local jobs and provide local and state tax revenue, states have traditionally held the right to license and regulate the distribution, sale and service of vehicles within their borders. The federal government has only preempted state laws that impact vehicle design, construction and safety, thereby establishing one set of motor vehicle safety standards for all 50 states. Auto dealers support this well-established and balanced framework. As Congress considers legislation that would regulate electric or autonomous vehicles, it must ensure that the states’ traditional role to license and regulate vehicle commerce, provide consumer protections, and promote vehicle price competition within its borders is preserved.

TAX HIKES WILL DAMPEN AUTO SALES AND HURT SMALL BUSINESS FAMILY DEALERSHIPS

NADA is concerned that the proposed tax hikes to partially offset the cost of the Administration’s infrastructure proposals will weaken the nation’s auto industry. Increasing the tax burden on consumers will lower demand for new cleaner and more fuel-efficient vehicles, and changes to stepped-up basis will hurt the viability of small business family dealerships. The Administration’s proposal would: 1) raise the corporate tax rate from 21% to 28%; 2) raise the top personal income tax rate from 37% to 39.6% and apply the 3.8% Medicare surtax to all pass-through business income, effectively increasing the top rate to 43.4%; and 3) raise the capital gains rates from 23.8% to 43.4% on households/taxpayers earning over $1 million a year, which could almost double the rate for owners of pass-throughs who sell their businesses. 

Similarly, the Administration’s proposal to eliminate stepped-up basis on inherited assets for gains of more than $1 million ($2 million for married couples) would needlessly strip working capital from dealerships, which are mostly second and third generation businesses operated as pass-throughs. Under this proposal, at the time of death, the capital gains rate would be assessed on the fair market value of the assets less the decedent’s basis as if the assets had been sold, triggering liquidity problems and tax compliance burdens, and eviscerating much of the benefit of the current federal estate tax exclusion. NADA and a business coalition have sent a letter to the tax-writing committees opposing repeal of stepped-up basis and taxation of gains at death, which would hurt family businesses and their employees. Congress should not raise taxes that threaten to dampen auto sales and undermine Main Street small businesses.

OVERBROAD RECALL BILL (S. 1835) WILL CREATE A CONSUMER TRADE-IN TAX

Sen. Richard Blumenthal (D-Conn.) has introduced legislation that would cripple the used-vehicle market by halting a dealer’s sale, lease, or loan of used vehicles under open recall. The bill, S. 1835, is overbroad because most recalls do not require the drastic step of grounding. Additionally, the bill would create a “trade-in tax” that would instantly devalue a car buyer’s trade-in by grounding recalled vehicles for minor matters, such as a peeling sticker. S. 1835 would also push recalled vehicles into the unregulated private market, making it more difficult to complete recall repairs. S. 1835 may be offered as a floor amendment to the Senate transportation bill this summer. The House passed its transportation bill (H.R. 3684) on July 1 without overbroad recall grounding language. Congress should oppose any recall grounding amendment to the transportation bill which creates a “trade-in tax” on millions of consumer trade-ins without even guaranteeing that a single additional recalled vehicle will be fixed.


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