Is he freaking serious?
TradeOnlyToday reported earlier this week that New York Governor Paterson might propose a luxury tax on boats when he unveiled his 2009-10 budget plan. He did exactly that on Tuesday in Albany.
In fact, the proposed budget, which is certain to face a contentious battle in the state legislature, contains a whopping 137 new or increased taxes and fees. Its already being labeled by some as a plan to nickel and dime New Yorkers. But when it comes to a luxury tax on boats, were talking about a lot more than nickels and dimes!
Specifically, if passed, those purchasing a boat worth $200,000 would get tapped for an added 5 percent luxury tax. Interestingly, the rich as expressed by the plan, would also pay an additional 5 percent tax on cars of $60,000, aircraft of more than $500,000 and jewelry or furs topping $20,000.
Does it have a familiar ring to it? It should. While the numbers are somewhat different, the idea is a mirror of the disastrous luxury tax slapped on the same items by the federal government in the name of deficit reduction in 1990. I say it was a disaster because the so-called rich simply flashed President George Herbert Walker Bush one-half a peace sign and stopped buying those products! For the American boating industry it was deadly.
When people simply stopped buying boats, thousands of employees in boat and engine plants across the country were furloughed. More than 25,000 boating industry workers ended up on unemployment and public assistance programs. It cost the government far more than it ever brought in so it was revenue negative. NMMA and MRAA repeatedly told government that would be the result. Still, it took Congress nearly three years to repeal it, admitting all along it was a textbook example of dreadful public policy.
Now, you may be thinking such a tax, if passed in New York, will not really impact the industry since most boats sold are under the $200,000 threshold. Unfortunately, history says youre wrong. In 90, the threshold was $100,000, but the market was confused and people just assumed the luxury tax applied to all boats. So, sales of all boats plummeted. People called it a discriminatory rip off and it was!
Now, here we are in December 2008. The industry is already rocked by recession, just as it was in 90-91. And, Paterson proposes this idea, a proven disaster for all. Moreover, if New York were to pass this, it seems likely other states would try to follow, possibly with even lower thresholds, erroneously thinking it would lead to more revenue.
To all those in government who ignore historical fact and think a luxury tax on boats is a way to increase state revenues, I say: Hurry and ask your proctologist to find your head!