Psst. There is a secret you need to know about if you took advantage of the government’s most recent bailout for the American auto industry, “Cash For Clunkers.” This secret is something that was apparently omitted in the description of the plan and involves taxes you may owe on the “rebate” Uncle Sam gave you to give the automobile companies to help pad their pockets after you gave the money to Uncle Sam in the form of taxes.
But many of those cashing in on the clunkers program are surprised when they get to the treasurer’s office windows. That’s because the government’s rebate of up to $4500 dollars for every clunker is taxable.
“They didn’t realize that would be taxable. A lot of people don’t realize that. So they’re not happy and kind of surprised when they find that out,” Nelson said.
Oops!
But maybe this will be helpful in getting people to understand that nearly every action they take these days has some sort of tax liability associated with it and that there is no “free” money. I can’t wait to see how the White House responds to all the angry emails and phone calls about these rebates being taxable! But I can imagine how they will react.
Joe American: “I’m VERY upset over having to pay taxes on my Clunker rebate!”
Washington Bureaucrat: “I’m sorry to hear that sir, but rest assured that Congress is working hard to give you a rebate for any taxes you had to pay because we care about you.”
Joe American: “Uh … thanks! But won’t that rebate also be taxable?”
Washington Bureaucrat: “Yes, and that is why you can rest assured that Congress is already working hard to give you a rebate on those taxes as well because we care about you.”
Joe American: “Well, won’t that rebate also be taxable?”
Washington Bureaucrat: “Yes, and that is why you can rest assured that Congress is already working hard to give you a rebate on …”
It would be funny if it weren’t so believable!
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