Before anyone pats too many members of Congress on the back for considering a move to make car loan interest deductible ... again, some brief History if you don't mind.
Traditionally, it always had been - until The Tax Reform Act of 1986.
The Tax Reform Act of 1986 made these changes in interest deductions:
* Personal interest on car loans, credit card balances, student loans, Internal Revenue Service interest penalties and other consumer borrowings is now only 65 percent deductible, rather than fully deductible.
Reagan wanted reductions in personal income tax rates for both lower and upper income individuals - and a reduction in an outlandish corporate tax rate of 50%. See this old NY Times item. This was during the Tip O'Neil era. The Dem majority allowed them to shut out Republicans in drafting a bill and they did. Fortunately they didn't get everything they wanted. But one consequence of their legislation was that it drove people to re-finance homes to buy a car, a boat, or whatever. That way the interest was deductible. And this re-financing craze continued right up until our current crisis. Thanks for getting around to fixing this, Democrats. Even if it is far too late.
Completing work on a bill to raise $12 billion in new taxes, Democrats on the House Ways and Means Committee proposed tonight to put a cap on the mortgage deduction that individuals can claim for their first and second homes. The deduction would be available only for the first $1 million in mortgage debt.
The proposal represented the first attempt by Congressional tax writers to limit the mortgage deduction on principal residences, long considered a politically sacred tax benefit.
Working in closed session without Republican participation, the Democrats also proposed simpler rules for home-equity loans but recommended limiting the deductions to the first $100,000 of debt.
In addition, they decided to make yachts and mobile homes no longer eligible as second homes for purposes of qualifying for the mortgage interest deduction.
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