“Cash for Clunkers” Insurance Clause Irks Wisconsin Lawmakers


Legislators in the state of Wisconsin are expressing outrage over a provision of the “Cash for Clunkers” program that requires car owners to present valid insurance for the past year.

“Cash for Clunkers” Insurance Clause Irks Wisconsin LawmakersAccording to U.S. Sen. Russ Feingold (D-Wis.), the requirement is unfair to most Wisconsin car owners and drivers because auto insurance is not required in the state. Feingold wrote a letter to the program’s implementing agency, the National Highway Traffic Safety Administration (NHTSA)about the issue.

Feingold argues that because car insurance is not mandatory in Wisconsin, the federal government should not make insurance a requirement for car owners to participate in the program.

Wisconsin, however, is expected to make insurance mandatory on June 1, 2010, becoming the 49th state to do so. The last remaining state, New Hampshire, does not require auto insurance from its residents.

Other Democratic senators from Wisconsin, New Hampshire, and Michigan also signed Feingold’s letter. Sen. Judd Gregg of New Hampshire and Rep. Tom Petri of Wisconsin also signed on. Both lawmakers are Republicans.

In his statement, Feingold and the other legislators called on the NHTSA to reconsider the provision and correct it before the program’s limited funds are used up. The lawmakers also added that the NHTSA should ensure that the ‘cash for clunkers’ program should reflect Congress’ goal of having car owners from different states participate in the initiative.

The ‘cash for clunkers’ program is officially known as the Car Allowance Rebate System, or CARS. According to NHTSA officials, the program would give car owners the opportunity to avail of a $4,500 tax credit when they buy or lease a new car. Motorists, however, have to trade in vehicles that get fewer than 18 mpg to qualify for the rebate.

Auto dealers and insurance experts say that the program’s provision has complicated a growing number of applications. Because car insurance is not mandatory in Wisconsin, some car owners are finding it hard to trade-in their old cars for the tax credit.

For most auto dealers, however, the program has generated a boost for business despite the sluggish economy. Industry experts in Wisconsin also admit that the provision has lead to more car owners purchasing insurance.

Some analysts are skeptical, though, that the state’s motorists can avail of the tax rebates. The ‘cash for clunkers’ program is set to end Nov. 1 of this year or when the $1 billion allocation given by Congress runs out. Most experts agree that the amount would not last until the program’s expected end.

Less than a week after the program was launched, more than 16,000 cars have been sold under the NHTSA program, resulting to $68.9 million worth of tax credits.