Rand Paul, a critic of special interests, comes through for car dealers

Lesley Clark, McClatchy Washington Bureau on

Published in Business News

WASHINGTON -- Sen. Rand Paul, who has decried the influence of special interests in the U.S. tax code, played a leading role in preserving a tax deduction that auto dealers pushed hard to retain.

Under a provision the Kentucky Republican successfully inserted into the GOP tax bill before it cleared the Senate early Saturday morning, dealers could continue to deduct 100 percent of the interest they pay on the loans they take out to buy the vehicles that sit in their showrooms and on their lots.

The original Senate bill had slashed the deduction to 30 percent, though the House bill retained the full deduction on the so-called "floor plan" loans, which are also used by other businesses including boat, RV and motorcycle dealers.

Keeping the deduction at 100 percent was a top priority for the National Automobile Dealers Association, which represents the nation's nearly 17,000 franchised new car dealers. The group argued that the original Senate bill would have treated dealerships, generally closely held small businesses, the same as large corporations.

After the vote, the group had strong praise for Paul.

"Senator Paul's leadership on this issue was critical to ensuring that 100 percent floor plan deductibility was included in the tax bill," the group said on its website.

It featured a photo of Paul, noting, "This amendment, offered by Sen. Rand Paul, R-Ky., was the top priority for NADA in the Senate tax reform bill."

As a 2016 Republican presidential hopeful, Paul, who wrote in The Wall Street Journal that he'd repeal the more than 70,000 pages in the IRS tax code and replace it with a 14.5 percent tax on individuals and businesses. He said he'd also "eliminate nearly every special-interest loophole."

His office does not consider the "floor plan" loan deduction a benefit to a special interest, as it does not apply solely to automobile dealers.

Sergio Gor, a spokesman for Paul, said that "multiple constituents have previously reached out to our office regarding an unfair provision in the proposed legislation that would have done great harm to their industry and negatively impacted thousands of Kentucky jobs."


The dealers pushed hard. "Franchised automobile dealers do not have access to equity markets, so floor plan financing is a necessity, not a choice," the organization said.

Paul's amendment, the association wrote in a message to its members, "would preserve "the full deductibility of floor plan financing for a retailer of high-cost inventory such as vehicles, boats, farm equipment, etc., recognizing that limits on floor plan deductibility would disproportionately harm small businesses, particularly during an economic downturn."

NADA President Peter Welch had appealed to Senate Majority Leader Mitch McConnell, R-Ky., contending that the change would impose "unreasonable burdens" on automobile sellers: "Small-business dealers should not be treated the same as large corporations that choose debt over equity for tax purposes."

Paul hailed the passage of the Senate tax bill, but called for lawmakers to go further.

"While I still would have preferred larger cuts, this bill provides a foundation on which to continue building," he said after the bill cleared the Senate by a 51-49 vote, largely along party lines. "Today marks a victory for giving the American people back more of their own money and reforming an archaic tax code."

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