Politics — if you haven't paid attention thus far, you should take another look. Doing so just might save you some money.
If you happen to be one of those “few” car dealers pocketing a salary of at least $250,000 a year, get ready to pay some heftier taxes, in the form of the Alternative Minimum Tax, otherwise known as the AMT.
Dealers already have lost big time on the tax front when, last year, small businesses, including dealerships, failed to convince Congress to eliminate the estate tax (unaffectionately known as the “death” tax). It failed passage in the Senate by a mere three votes.
If you happen to pass onto the afterlife in 2011 or following years, your heirs potentially could pay Uncle Sam a whopping 55% of your estate. I wonder how many dealers, because of the prospect of paying that tax, will push to sell their stores and get out of the industry?
Sure, the “death” tax is bad but that is something your children will have to deal with; you'll be gone.
This AMT is another story altogether. It exists today and many of you likely have paid it. The AMT is a rather complicated tax designed to close some of the loopholes wealthy people — including dealers — use to avoid paying federal income taxes.
It's called an alternative tax, not because of your, ah, lifestyle, but because it is a another set of convoluted formulas set up to determine what your real income likely is, not what you say it is.
So why is it so important now? According to Republican Rep. John Campbell, a former California dealer, Democrats are looking to change the rules. The result being the predictable “tax the wealthy” scenario. Additionally, Democrats may try to include an increase of taxes on capital gains — taxes recently lowered by President Bush.
Within the next year or two, Democrats will try to eliminate the AMT for people making less than $250,000, while increasing it to anywhere from 36% to 48% (up from 26%-28% today) for people above that threshold. So you conceivably could find yourself paying 20% more in taxes in the near future.
Campbell predicts AMT will be a big deal. “All of us in this room have a dog in this fight,” he told attendees at the American International Automobile Dealers Assn. Summit in May.
So what can you do? Campbell's message is: “Engage with your politicians. It matters, and we do listen.”
He urges dealers to get involved. Politicians in Washington have to be shown why and how an issue matters to their constituents.
It's not just customers you need to have a relationship with. And it's not pollyannaish to think creating a relationship with your senator or representative can put you in a position to have a real voice in legislation that matters to you.
Your position as a high profile businessperson means you have some influence — you just have to exert it. In reality, it is just good business.