GARY JOBSON: Time to cap Maryland’s excise tax on boats

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I have been in the marine industry for nearly 40 years here in Annapolis. I applaud the General Assembly’s initiative to address the tax on boats.

The General Assembly has an opportunity this year to give a big boost to Maryland’s struggling marine industry while also generating additional tax revenues for the fund responsible for upkeep and improvements to the region’s waterways. It’s time to place a cap on the state’s boat excise tax.

During the last few years, Maryland has fallen behind our competitor states up and down the East Coast when it comes to how much of a boat’s value should be subject to an excise tax at registration. Neither Delaware nor Rhode Island has a tax. Virginia has long had a cap, limiting boat owners to paying no more than $2,000 in an excise tax, and Florida passed a cap three years ago.

Not surprisingly, Marylanders who own bigger and more expensive boats are increasingly choosing to register their boats in other states. Even as the nation’s boat sales industry has begun to rebound, Maryland is not seeing the increase in registration of larger recreational boats that is being experienced in many other Atlantic Coast states.

All of us who have ties to Maryland’s marine culture can tell stories of friends and neighbors who have boats based in other states. Unfortunately, when you’re talking about avoiding a boat excise tax of tens of thousands of dollars more than what is required to be paid in other states, it makes economic sense. And the Marylanders who can afford to own bigger boats (such as those costing in excess of $200,000) tend to have the financial means to be able to register and maintain their boats in other states.

What’s the consequence for Maryland? First and foremost, our excise tax policy is hurting jobs and spending here in our state. In the marine industry, the general rule of thumb is that a boat owner spends about 10 percent of a boat’s value each year on maintenance and other work. For a boat worth $500,000, that’s $50,000 of spending at the marinas and boat repair shops in other states, instead of Maryland. And with studies showing that every six boats registered in a state generate the need for one new position in the marine industries, we are talking about a real impact on jobs, too.

But in a perverse way, our state’s decision to continue to apply the state excise tax to the entire value of all boats is actually hurting the overall revenues going to the fund that the excise tax is intended to help.

All of the money collected from the boat excise tax goes into Maryland’s Waterway Improvement Fund, which then offers matching grant money to local jurisdictions for dredging and other projects aimed at improving rivers, harbors and other waterways.

Money going into that fund has been steadily declining, a reflection of a declining number of new boat registrations in Maryland. That decline wasn’t so surprising at the depths of our national recession, when boat sales were off nationally. But as boat sales and registrations have begun picking up over the past two years, we aren’t seeing a similar rebound here in Maryland, at least among boat sales and new boat registrations.

In 2011, Maryland ranked 26th nationally in the overall total value of boat sales. Do we really think that Maryland, the home of the Chesapeake Bay, should be ranked in the bottom half of boat sales in this country?

I believe that a solution can be found in legislation being proposed by Sen. John Astle and Delegate Ron George that would cap the boat excise tax to the first $200,000 of the value of a boat. The cap would ensure that owners of expensive boats would still pay $10,000 into the Waterway Improvement Fund, but would eliminate the huge financial penalty that is driving these owners of expensive boats to register their boats elsewhere and not permit them to stay in Maryland waters for more than 90 consecutive days.

After Florida approved its boat sales excise tax cap in 2010, an independent study found that more boat sales stayed in state, and the average sales price of boats increased.

We fully expect the same to follow here in Maryland. And given the most recent boat sales numbers, we would need to merely get an additional 130 or so boats worth $200,000 or more to come home to Maryland to make up for the Waterway Improvement Fund revenue loss — a number that seems like a very modest target.

For our marinas, boat repair centers and other companies that provide services to boats, this is about more than revenues to the state. This is about jobs and local spending. Let’s stop pushing our expensive boats out of state and find a way to keep those dollars here in Maryland.

Gary Jobson is a world-class sailor, television commentator and author. The ambassador for sailing in the United States, he is past president of US Sailing and was tactician for Ted Turner’s victorious 1977 America’s Cup campaign. Visit JobsonSailing.com for more information.

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Comments

8 comments on “GARY JOBSON: Time to cap Maryland’s excise tax on boats

  1. Todd Taylor

    Thank you Mr. Jobson. Hearing support on this issue from folks like yourself is what brings needed attention to this matter. Why our lawmakers here in Maryland refuse to examine the overwhelmingly positive results not only to the marine industry but to the general employment and tax base in Rhode Island and Florida that resulted from similiar action is baffling. Considering the importance of boating and the marine industry to the state, I remain hopeful that this bill passes this year.

  2. Chuck Wistar

    Very well-stated case for cap on Maryland’s excise tax on boats.
    As a dealer and broker of yachts typically north of the proposed $200,000 cap I can assure you that the topic of Maryland’s taxes as compared to other states Jobson mentions is part of every transaction.
    I estimate that half our customers elect to domicile their boats elsewhere, documenting and registering them quite legally, and saving enough on taxes to accommodate any inconvenience in getting to their boat docked in Delaware or Virginia.

  3. Stephen Crane

    I think that boat tax is the least of your problems if you live in Maryland, right down there with jellyfish.
    – proudly ex-Marylander

  4. Gerald Pitts

    Mr. Jobson’s comments are well taken and his substantial background as a world class sailor is well known and admired. Along with the very straightforward comments about the success Florida has experienced with its tax cap of $18,000, Mr. Jobson strikes home with his remarks about the proposed $10,000. Maryland tax cap and the simple fact that we would only need 130 boats to make for any shortfall described in the editorial in the Baltimore Sun describing the ‘in depth’ study requested of the University of Maryland by the Department of Natural Resources, who oppose the tax cap. Now it’s time for a reality check – The form DNR-B-110 – a Certification of State of Principal Use – is executed by the vessel purchaser and the Maryland Dealer/Broker, each under the penalty of perjury, to exempt the Maryland sale transaction from the 5% excise tax. It would be unfair to condemn all Maryland brokers and dealers and describe their misuse of this form to aide the purchaser avoid the 5% excise tax due Maryland. But, in fact, as long as the dealer or broker has the appropriate executed copy in their files at audit time then they’re covered – any action will be taken against the purchaser if the DNR enforcement divison discovers that the purchaser owes the tax. I propose that the DNR-B-110 be an included line item on the dealer/broker monthly report to their DNR control office and that all DNR-B-110’s be immediately sent to the tax collection enforcement division for a thorough investigation. Period. That will help substantially to refill the Waterway Improvement Fund coffers with the proper taxes being collected, the 100% penalty being applied along with the appropriate interest due. Then, a few indictments for perjury and the associated publicity should do away with tax evaders and cheats.

  5. zyxw

    Never going to happen. The problem here is that this bill shouts “tax loophole for the rich,” whatever its underlying merits. The average person can’t imagine spending $200,000 on a yacht, and quite rightly wonders why those people should get a special break on their taxes. Besides, didn’t a university study just recently conclude that the increased business would not offset the loss in tax revenue? I RI and Delaware everyone is treated the same regardless of the price of their boat, so the tax break doesn’t have the rank smell of special privilege.

  6. Liz Smith

    As a former marina owner on the Chesapeake, I stood in opposition of this tax from the very beginning, having seen quite a few boats join the exodus out of the state when this ill conceived tax became law. Sadly, Maryland is revenue ravenous and in so being, has continued to cripple an industry vital to the state’s economy.

    Contact your legislators …. better yet, take them boating .. !!!

  7. zyxw

    A far better solution, and one I think might have a somewhat better chance of passage because it is much fairer, would be to lower or eliminate sales and use tax on all boats, not just ones owned by rich folks, and then gradually raise boating registration fees on a sliding scale in order to continue to fund boating programs. This would also provide increased business for lots of different boatyards, marinas, and marine stores, not just the ones catering to larger yachts. This is what RI did, and it has worked beautifully.

  8. Jeff Erdmann

    Large boats go to where they are welcome & quickly leave where they are not.
    Taxation above & beyond competitive ports is not welcoming.
    Florida’s $18k cap, a welcome mat to encourage large boat owners to buy – sell & use their boats in Florida waters.
    These boats boost the local economy creating jobs before, during & after the sale by spending 10% of their cost annually as Mr. Jobson points out.
    Florida increased sales – use tax revenues on large boat sales nearly 10 times in the first year of implementation, truly a win – win for Florida!

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