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All taxes are not created equal

Some taxes are good and some are bad. More specifically, the federal gas tax and the death tax are worthy of attention these days. After all, Washington is talking tax code revisions and revenue increases and that’s always scary.

The federal gas tax isn’t getting much press right now but the Highway Trust Fund is supposed to become insolvent by June since Congress passed only nine months of funding last August. So it’s bound to come up soon and it’s one we both like and for which we have a stake. However, the recent call by the Wall Street Journal to abolish the federal gas tax is clearly not something the marine industry can support.

Without the gas tax, most of the $600 million in the Sport Fish Restoration & Boating Trust Fund spent annually to promote boating and fishing would simply disappear. These funds are a user-pay, user-benefit program that the industry could never replace. The money comes from boaters and anglers in this way: Excise taxes of 10 percent on certain sportfishing tackle; 3 percent on fishfinders, electric trolling motors and import duties on tackle and pleasure craft; and most from federal gas tax paid by anglers and boaters in their off-highway use.

While some in Congress support killing the gas tax (in favor of other funding models), others want to significantly raise it. Neither is good for boating. So here’s a “taxing” suggestion:

When introduced in 1956, the concept behind the gas tax was simple: those using highways would be paying for them. But now the Highway Trust Fund is being tapped for everything from street cars to ferries to biking and hiking trails and more. Put gas in your car, pay for a trail.

The Wall Street Journal noted that since 2008, such spending has increased 38 percent while there’s been zero increase in spending for roads. So it’s logical to use Highway Trust Fund dollars for highways and find other funding models for mass transit, trails and the rest. If that were so, even the Wall Street Journal predicts the fund would be essentially solvent for the next decade. No gas tax increase needed — just use it as it was intended.

On the other hand, as a dealer and small-business owner, here’s a tax you gotta hate — the death tax. There’s some positive action to report on this unjust tax that literally re-taxes wealth that has already been taxed throughout the descendant’s lifetime.

For the small businesses that are the majority of our dealerships, this insidious tax scheme particularly hurts family businesses that might have accumulated significant assets, but don’t have the cash to pay the 40 percent tax bite. The ugly result is that some or all assets must liquidate — a family loses the business or it closes forever leaving employees and suppliers out in the cold.

Now, there is a $5.34 million exclusion, and while the family of some dealers might fall under it, others might deliberately try to stay under it. But that’s not good either. For one thing, business growth can mean more jobs, fueling local economic expansion. So, without question, the death tax can actually have a negative impact on the economy. Reason enough to bury it.

To its credit, the Marine Retailers Association of the Americas has been a long-standing proponent of death to the death tax. “It is always very high on our list,” MRAA president Matt Gruhn says. “We consistently try to team up with other organizations who share our goal and we actively support measures that could end this unfair tax.”

There is currently one bill in the new Congress and, notably, it passed out of the House Ways and Means Committee last week. It’s H.R. 1105, the “Death Tax Repeal Act of 2015,” sponsored by Rep. Kevin Brady (R-Texas). It passed in the committee 22-10 along party lines.

So is this finally the year the death tax meets its end? Uncertain at best. Republicans favor it, Democrats, including the President, support higher estate taxes on “the wealthy.” Interestingly, the Republican-led Congress is in a position to force a showdown in the Oval Office. Stay tuned and watch the MRAA for cues to become engaged if called on.

Comments

2 comments on “All taxes are not created equal

  1. Catherine Ahern, Coalition for Recreational Trails

    Just like the Sport Fish Restoration and Boating Trust Fund, the Recreational Trails Program (RTP) is a user-pay/user-benefit program that returns federal gas taxes paid for non-highway recreation – e.g., snowmobiling, four-wheeling, ATVing, off-road motorcycling – to the states for trail projects. Although the gas tax is paid by gas-using vehicles, resources are shared with other users of recreational trails at the state level to develop a balanced system of recreational trails. Since its creation in 1991, the RTP, which currently only receives about 40% of the federal gas taxes paid by these recreation enthusiasts, has become the foundation of state trail programs, leveraging additional funds from other sources and supporting more than 20,000 projects across the country.

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