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Bush Proposal May Cut Tax on S.U.V.'s for Business By DANNY HAKIM

ETROIT, Jan. 20 — The Bush administration's economic plan would increase by 50 percent or more the deductions that small-business owners can take right away on the biggest sport utility vehicles and pickups.

The plan would mean small businesses could immediately deduct the entire price of S.U.V.'s like the Hummer H2, the Lincoln Navigator and the Toyota Land Cruiser, even if the vehicles were loaded with every available option. Or a business owner, taking full advantage, could buy a BMW X5 sport utility vehicle for a few hundred dollars more than a Pontiac Bonneville sedan, after the immediate tax deductions were factored in.


Consider the Hummer H1 as an example of the new deduction. It is one of the largest and most expensive S.U.V.'s, with a base sticker price of $102,581, including destination charge. Under the Bush plan, small-business owners could use all of an annual $75,000 capital equipment deduction toward the purchase; the current equipment deduction allowance is just $25,000.

That is in addition to thousands of dollars in other deductions. Under existing rules, a business could deduct 30 percent from the base price left after the capital equipment deduction, a benefit put in place as part of a post-Sept. 11 stimulus package. In the case of the H1, that would be a further deduction of $8,274.

Finally, 20 percent could be deducted from what is left, part of the business deductions available for automobiles. For the H1, that would be $3,861 more in deductions.

The total would be more than $87,000 in deductions, or about $33,500 in savings in federal taxes alone for buyers in the highest bracket. Under current rules, just less than $60,000 could be deducted.

Deals for cars and small sport utility vehicles are much less appealing. Currently, a business can deduct no more than $7,660 for a car in its first year of service, $4,900 in the second year and less in the succeeding years. The Toyota Prius, which uses a fuel-efficient blend of gasoline and electric power, is eligible for an additional $2,000 clean vehicle deduction. That means a business owner could deduct under half of the $20,500 sticker price of the Prius in the first year of purchase, for about $3,700 worth of federal tax savings for those in the highest tax bracket.

David Friedman, an engineer and analyst at the Union of Concerned Scientists, an environmental group, said the increased deduction for big vehicles was "yet another loophole that the government is keeping open that is increasing our oil dependence."

"Before, it was large enough to drive a small S.U.V. through," he added. "Now it's large enough to drive a Hummer through."

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