Don't Mess With Taxes

That's how the mayor of London this week described the U.S. Ambassador to Great Britain.

What prompted such invective from Mayor Ken Livingstone?

Ambassador Robert Holmes Tuttle, who last July took over the American Embassy posting, has refused to pay the city's congestion charge. This is a fee London instituted three years ago to encourage people coming into town to use other modes of transportation. If you do decide to take the Bentley or Aston Martin or your little MG into the center city, you'll have to pay £8 per day ($14 U.S.).

The closest U.S. equivalent is probably the commuter tax that many cities charge (or want to charge) suburban workers who come in via auto to their jobs. This was a huge issue for Washington, D.C., when we lived in the national capital area (with one or both of us commuting from Maryland into the city 18 of our 19 years there). Although a federal court last year denied the city the right to impose the tax unilaterally, I suspect the effort is far from over.

But back across The Pond.

Ambassador Tuttle and his staff say the congestion charge is a tax and foreign diplomats are exempt from local taxes. Yes, 230 years later and we're again fighting with the Brits over taxes.

In fairness to the Ambassador, this is not the first time American officials have denounced the charge. Before Tuttle was appointed and prior to the tax's inauguration, an American embassy spokesman said, "The U.S. government is opposed to the application of the charge to U.S. embassy staff and other diplomats because it is in violation of the 1961 Vienna Convention, which bars the taxing of foreign diplomatic staff."

But the Americans (and employees at more than 30 other embassies) eventually ponied up, paying the fee that, in the beginning, was £5. Three extra pounds (about five and a quarter American), however, was apparently the breaking point. Last July, when the charge increased by that amount, U.S. diplomatic drivers quit paying. This USAToday story provides a good background on the dispute and lays out both sides' arguments.

And so began the latest tax battle, being fought, so far at least, with just words.

In addition to the "chiseling crook" comment, Livingstone also called Tuttle a "car salesman," and technically the mayor is correct. Before becoming Ambassador, he was managing partner of Tuttle-Click Automotive Group, which has been selling cars in California for 60 years.

Now, I didn't hear the tone Livingstone used. I've just seen written reports like this one in the Kaleej Times. But I suspect it was a bit derisive. Auto dealers, please don't write! Those were Livingstone's words. I'm just the humble messenger! And at least he didn't preface it with "used."

Complaints aside, the official word is that the congestion charge has been a great success. Even some unaffiliated observers agree. Transfer, a blog focusing on architectural issues, lauds the mayor's efforts: " ... [Livingstone's] politically risky congestion charge has turned out to be a great success -- increasing bus ridership, cutting the number of pedestrian fatalities, and just generally making for a more pleasant central London."

Still, many Londoners hate the charge. But they're also not overly enamored of Americans right now, so maybe Livingstone's attack on U.S. officials is a smart political move. By implicitly linking the hated car charge with the U.S., he's put a roundabout spin on "the enemy of my enemy is my friend" approach: The Americans hate it. We're none too happy with Americans, especially those associated with the current administration. Therefore, maybe we don't really hate the congestion charge so much after all.

Or maybe Livingstone truly thinks Tuttle is a "chiseling little crook."

Today's Tax Tip: All this tax turmoil on the other side of the Atlantic brought to mind some issues that you might face when filing your U.S. return here in the next few weeks.

Some taxpayers have been known to try to pad their itemized deductions with auto-related expenses. I'm not talking about allowable business driving costs (that I discussed here) or even the mileage you can claim when you use your vehicle to do charitable work.

No, these folks want to write off regular, run-of-the mill auto costs as deductible itemized taxes. They count car registration fees and even license and auto tag renewal charges as taxes. Sorry, but that, in race parlance, will get your return black flagged by IRS examiners.

Car registration, title and tag charges and driver's license fees are not deductible taxes, even though they are collected by the county and/or state. Neither can you deduct your state's gasoline excise taxes.

And nope, parking and traffic tickets are not taxes so don't even think about trying to write those off either.

That U.S. tax law position is something Livingstone might want to point out to the intransigent U.S. embassy drivers, since he's countered their diplomatic immunity to taxes argument by insisting that the congestion charge is in actuality more like a parking ticket than a tax.

For more on what taxes are -- and aren't -- deductible from your federal return, check out this story.

Photo of London traffic jam, in pre-congestion charge days, by Ian Britton courtesy of FreeFoto.com.

Addendum, March 31: This post was selected for inclusion in this week's Carnival of Cars, hosted by Tapscott Behind the Wheel.