Connecticut Gov. Dannel P. Malloy signed into law Wednesday his controversial budget that raises the state sales tax and includes a 0.65 percent luxury tax on boats.
The original luxury tax proposed was 3 percent.
Earlier proposals that called for removing four marine-related exemptions from the state's sales tax - winter storage fees, labor fees on maintenance and repairs, brokerage commissions and credit for trade-in values - were dropped after strong opposition from the Connecticut Marine Trades Association and others in the industry.
Grant Westerson, president of the trade group, said the damage to the industry could have been worse.
"Of the five issues affecting the industry, we got rid of four of them," Westerson told Soundings Trade Only. "We're pleased that we got as far as we did."
Under the new budget the Connecticut sales tax will increase from 6 percent to 6.35 percent. A 0.65 percent luxury tax will be added on boats that sell for $100,000 and more, for a total tax of 7 percent.
Westerson said the message from the association is simple: "We don't have a 7 percent luxury tax; we have a 0.65 percent luxury tax."
Although the tax difference in dollars and cents to boat buyers may not be a deal-breaker, Westerson said the perception of a tax-heavy state could affect buyers.
Referring to the 1991 federal luxury tax (repealed in August 1993) that devastated the industry, Westerson said, "Anyone who's been in this industry for the last 20 years knows that a luxury tax does not work when you factor in the unemployment benefits paid to laid-off workers."
The budget is scheduled to take effect July 1, but is contingent on union concessions or state employee layoffs to balance it.