Baltimore Sun stands against boat tax cap

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Capping vessel excise taxes on yachts bought in Maryland might boost sales, but it would also undermine the state’s $2 billion boating economy.

That’s according to an editorial appearing this week in the Baltimore Sun regarding the debate in the Maryland legislature about capping vessel excise taxes at $10,000. The Sun opinion suggests reducing the state’s dependency on the excise tax and instead providing incentives for boat owners to keep vessels in the state because that would stimulate the local economy.

“The latest proposal ... could do more harm than good,” the editorial read.

The Waterway Improvement Fund — the entity responsible for the dredging and oversight of Maryland’s waterways, facilities and buoys — should be less reliant on excise taxes and more dependent on other fees. Providing incentives for people to buy and keep boats in Maryland could be one way to increase that fee revenue.

Though the tax would only affect boats more than $200,000, that is a customer base worth retaining, the editorial stated. Although those high-end boats represent less than 2 percent of annual sales, they account for nearly a third of excise tax revenue.

“When those vessels are kept in Maryland marinas, they likely generate a lot more revenue in repairs, service, refueling and other charges,” the editorial stated. “Considering that boating is estimated to generate about $2 billion in economic activity and accounts for about 35,000 Maryland jobs, why not offer some incentive to buy or keep a boat here? Some even believe that additional boat sales could offset the $3 million in annual revenue that the cap would cost the state.”

A study released last week by the University of Maryland's Environmental Finance Center and commissioned by the Maryland Department of Natural Resources showed that a tax cap wouldn’t stimulate enough additional sales to recover lost revenue from the decrease. Instead, Maryland should reduce dependency on the excise tax through increases in licensing and registration fees that haven’t been adjusted since the 1960s.

The state could also apply the state’s 6 percent sales tax to boating repair or maintenance labor and then direct the revenue to the Waterway Improvement Fund, though that suggestion would likely be controversial, the opinion piece stated.

“The point is to find the means for boaters to pay for themselves much as Maryland's drivers finance road improvements through the Transportation Trust Fund,” the piece read. “Capping the tax might help some businesses in the short run, but it fails to make the industry self-sustaining, which should be the primary goal of any change in tax policy.”

Click here for the full editorial.

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