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The economy, Congress and mortgage deductions

The old adage about seeing the glass half-full or half-empty couldn’t be more applicable than it is today. I hope you’re like me and focus on it being half-full.

The news came out Wednesday that the economy grew at an annual rate of 1.7 percent in the second quarter. It’s sluggish growth, yes, but it’s very important to also recognize it’s up from the first quarter’s 1.1 percent. Moreover, this pickup is generating forecasts that the economy will pick up speed in the latter part of the year and that’s good news when we realize the industry’s important fall boat show circuit begins in just a few weeks.

Briefly, economists now think businesses will step up investment. In fact, it began in the second quarter (up 4.6 percent) and it offset a surprising reduction in consumer spending. The latter isn’t expected to last, however, as economists predict steady job growth (average 202,000 per month from January through June) will trigger more spending and the economy will expand at an annual rate of 2.5 percent in the third and fourth quarters.

Add in other facts that indicate growth will pick up more such as: Home construction (newly built homes sold in June at fastest pace in five years) has been on a roll for more than a year now, leading to expectations of even more construction and related jobs — spending on home construction has been up 13.4 percent so far this year; Auto sales have also been rolling, topping 7.8 million vehicles in the first six months this year (the best first-half total since 2007) and all lights are green that strong auto sales will continue through the third and fourth quarters; and a significant damper on the economy — major cuts in federal government spending — is now mostly behind us with only 1.5 percent in cuts during the second quarter after a big 8.4 percent hit in the first quarter.

Finally, if we ignore the political rhetoric from those who espouse the sky is falling, we can head into our fall selling season clearly expecting to see more success than a year ago.

Mortgage deductions

You would think Reps. Mike Quigley, D-Ill., and Tim Walz, D-Minn., would have learned last year that the elimination of the second mortgage interest deduction on boats would have a negative impact on sales, production and jobs. But they’ve reintroduced their “Ending Taxpayer Subsidies for Yachts Act” anyway. Again, they single out just boats (while continuing to allow such deductions on RVs and vacation cottages, etc.) in what is clearly political posturing by two representatives who could readily serve as icons for shortsighted thinking. Is it any wonder Congress has a lower rating in the eyes of the public than rodents.

Says Quigley: “As we work to get our fiscal house in order, we have to reform our tax code and put an end to frivolous tax loopholes like these.” Seriously, did he really say “as we work to get our fiscal house in order?” Oh, surely this will do it — because in Quigley’s thinking luxury yachts qualify for the interest deduction if they’re equipped with bedding, toilet and a kitchen — the types of boats only the super-rich can afford.

Walz, on the other hand, is a real trip. “The Mortgage Interest Deduction was made to help middle class families own a home . . . not to subsidize yachts for the super-rich.” Apparently, Walz can’t grasp that those of us who deduct the interest on a second mortgage loan for our boats are the middle class. It’s well known that the “super rich” already use up their limited allowable interest deduction for other things, not boats. Even worse, one must ask how Walz can blatantly fail to see that in his own state many middle-class workers have jobs in boat manufacturing plants, dealerships and marinas that he will hurt through this legislation.

So it’s time once again, especially of you’re a dealer, manufacturer and boating industry employee in Illinois or Minnesota, to email or call these congressmen and say their bill is not only discriminatory, but could cost the jobs of hard-working citizen in their states.

Comments

6 comments on “The economy, Congress and mortgage deductions

  1. captA

    Norm,

    The way economic growth is calculated has recently changed. The numbers now include entertainment industries like “Lady GAGA”. If you compare the current growth estimates using the historical algorithm, economic growth was 0.8%.

  2. Ed Parker

    Enough, already! Why is it the taxpayer’s responsibility to subsidize the purchase of a boat or RV, never mind a second home? The idea is to shrink government across the board, not pick winners and losers. I love your writing, Norm, and I understand your reasoning on this issue. But you are running against a strong tide of conservative outrage when it comes to such government giveaways.

  3. Lou Mencuccini

    It seems as though these 2 representatives are touting a party line. They need to be made aware of the contribution in jobs and taxes that the recreational marine market provides. Our industry has undergone massive reductions since 2008 both in those employed in it and on the end user side to the point that the largest manufacturer and brand, Bayliner could not support it’s line of cruisers here in America. This is another nail along with E-15 and more incentive to send jobs overseas.

  4. Michael Bryant

    While I sympathize with those who want to shrink government spending as I do, Norm does point out that these two Reps. are not interested in shrinking government, this is simply a slight of hand trick. Any chance they can use the class warfare card while at the same time really not changing the buying habits of the class of people you are claiming you are targeting is a winner for Democrats. Its only when someone can point out who are the real people you are affecting, the middle class. Why? because they buy boats too and yes their boats do qualify for the second home deduction. Remember the pledge not to raise taxes on the middle class? That is really what is being done here. This is why they do not include RV interest nor second home interest but because it will not be perceived as being the play ground for the rich. Such hypocrisy! I hope the voters in their respective states throw these two clowns out of office.

  5. Thom Dammrich

    What is a reasonable position for the recreational boating industry to take on the issue of the second home mortgage interest deduction? Eliminating the deduction for boats wouldn’t raise enough money to be a rounding error in the federal budget. Same is likely true for RVs. The real money is in the second home on land. Whether that deduction gets repealed or not will depend a lot more on the housing industry and realtor lobbyists than boating interests. If Congress wants to repeal the second home deduction for ALL second homes (on land, on water or on wheels) so be it. But, DO NOT single out boats for the elimination. It raises no money and it perpetuates the myth that boating is for the wealthy! 95% of all boats in the country are trailerable and 75% of all boat owners have a household income of less than $100,000. Boating is about middle class workers making products for the enjoyment of middle class Americans. 85% of all new boats sold in the US are made in the US. We are a uniquely American manufacturing industry. If we have to take our pain along with everyone else in tax reform, we will survive. But, DO NOT single out boating!

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