In the comments of a post below, a reader reminds us that the latest bit of populist tax policy, demonizing corporate jets, is a rerun of the fight over taxes on yachts back in the late 1980s and early 1990s.
President Bush, in his budget proposals, asked Congress to repeal the 10 percent luxury tax on yachts priced at more than $100,000 (and also on private planes that cost more than $250,000). The repeal, which Congress is likely to approve, would be retroactive to Feb. 1.
Since the tax took effect in January 1990, hundreds of builders of large and small boats have spoken of it as a stake driven into the heart of an industry already suffering from the recession, tighter bank rules on financing and fallout from the gulf war.
In the last two years, about 100 builders of luxury boats — recreational craft costing more than $100,000 — cut their operations severely and laid off thousands of workers. Some builders filed for protection from creditors under Chapter 11 of the Federal Bankruptcy Code.
During my earliest days in journalism, I noticed that Rep. Patrick Kennedy, Rhode Island Democrat and son of Sen. Ted Kennedy, introduced legislation for a tax break on yacht purchases. I can’t find my ancient articles collecting dust, but the Tax Foundation summarized it, “20-percent tax credit to anyone who buys a new custom luxury vessel, of at least 50 feet in length, in the United States. For example, if an individual purchases a $250,000 custom yacht, that person will receive a credit against his federal income taxes of $50,000.” Kennedy’s district, of course, included many boat builders.
If you want less of something, tax it; if you want more of something, tax it less. Sadly, Kennedy never managed to apply this beyond yachts.
If we believe that America has too many jobs in building private planes, then Obama’s repeal proposal is a good idea.