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Luxury tax proposal in New York State

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. It’s already being labeled by some as a plan to “nickel and dime” New Yorkers. But when it comes to a luxury tax on boats, we’re 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 you’re 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!

Comments

9 comments on “Luxury tax proposal in New York State

  1. David Tomen

    Great article Norman. Anybody here feel like they’re in the Twilight Zone? Interesting that your article has not received any comments. That is likely because it is the industry that reads these articles. When something is so well said – there is nothing left to say.

    And this leaves us with one of the biggest challenges in this industry. The lawmakers and legislators are typically not boaters. The leadership in large corporations who in some way impact the recreational boating industry suffer from the same malady. They can’t see past the beach. They just don’t get it.

    Most of us in managerial roles and leadership positions in this industry have fought with this never ending battle all of our careers. The reality is that it will never go away.

    This is why it is so important that we stay with and support the folks in the NMMA and the Discover Boating campaign among others. And encourage the selection of lobbyists who are of and know this industry.

    Anybody entertained the idea of pooling our resources and giving the Obama family a nice boat for Christmas?

    Keep up the good writing Norman, and Happy Holidays!

    David Tomen CPYB
    http://oasisyachts.com
    http://gifts4boaters.com

  2. Ken Stofflet

    Norm you act like you are surprised by this move. You and I have been around our industry a long time and let’s face it as been the target of every conceiveable tax known to man. None of which acheived it’s intended goal. The so called “Rich” and Boaters fall into that category as defined by any elected offical it seems, is always the target of any tax, in order to keep the under privlaged from paying to much. Sound familiar, “Spread the Wealth” ?

    This too shall pass, and by that I mean it will be enacted by New York and yes it too shall pass once they AGAIN figure out they put more people out of work and end up with a net LOSS OF REVENUE. But by all means New Yorkers need to contact everyone of their elected state officals and plead for some sanity in this. When is proven BAD IDEA a good one? Certainly not in these times!

    Keep the faith that some where in New York intelligent life can still be found.

  3. bill mason

    This is merely a snapshot of the “change” we are going to see in the next few years. Staes are just small potatoes compared to the “change” we will see form our federal government. Jor the plumber asked the question and got the real answer from our President elect in an unguarded moment. It’s not going to get any easier for those who are willing to work for a living.

  4. David Benson

    Those of us in brokerage that worked through the last luxury tax learned that it effected used boats as well. Most buyers thought it was an across the board tax on used as well.

    Most boat buyers are successful because they have taken a risk, provided a service, paid taxes, employed people who pay taxes, and are truly American Heroes. That is the story that needs to be told to combat the PR campaign painted by those in favor of these taxes. They paint the FAT CAT picture instead of the meal providers they really are….

  5. charles

    I think we missed the most important part of this… the FEDS are going to try and do this all over again. They need money and this is part of the overall Obamanomics… SOAK THE “RICH”. No state should be allowed to glom these dollars alone, the FEDS will do it. Or maybe since it worked out so well last time, they will give 5% to the Feds and 5% to the states… This will insure solid enforcement! I would not want to be a NY marina if this is enacted… Jersey and CT HERE WE COME! SELL MARINE MAX! (HZO)

  6. LARRY RODRIGUEZ

    HELLO…..HELLO?? WHERE WAS THE GOVERNOR OF NY WHEN THE FAMOUS FEDERAL “LUXURY” TAX THAT INJURED THE BOATING INDUSTRY WAY BACK YEARS AGO, AND THANKFULLY REPEALED BEFORE WE ALL HAD TO GO SELL APPLES IN WASHINGTON?
    BEEN DOWN THIS ROAD BEFORE, THIS IS SOME KIND OF DE JA VU…AND HERE WE GO AGAIN!
    I REALIZE THE GREAT STATE OF NEW YORK AND THEIR POOR MANAGEMENT HAVE TO GO THROUGH NOW, WHEN ALL OF A SUDDEN THEY FOUND THEMSELVES 15 BILLION ON THE HOLE!
    WHEN ARE WE THE PEOPLE, GOING TO START HOLDING THE MANAGERS (OUR POLITICIANS) IN OUR GOVERNMENT ACCOUNTABLE?
    MY RECOMMENDATION…..LETS FIRE THE GOVERNOR!

  7. Bob

    What does our intelligent Governor think this tax will do? Generate more income for New York? Most of the boats $200,00.00 and up get registered in Delaware and New Hampshire to avoid the existing sales tax. Why doesn’t he do something about keeping that money where it belongs.

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