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Boat mortgage interest deduction is an incentive

Three congressmen have demonstrated their genuine lack of knowledge by introducing the “Ending Taxpayer Subsidies for Yachts Act” (H.R. 1702), which would eliminate the mortgage interest deduction on boats qualifying as second homes.

With this bill, representatives Mike Quigley (D-Ill.), Tim Walz (D-Minn.) and Gary Peters (D-Mich.) have become textbook examples of pandering.

“As we work to address our budget challenges, closing this frivolous tax loophole is a no-brainer,” Quigley says.

Well, to Quigley it may be frivolous and a no-brainer, but to the men and women whose livelihoods are building boats, the only no-brainer may be the congressmen!

As for Walz, his statement is equally revealing: “Closing this tax loophole restores the mortgage interest deduction to its original purpose — helping middle class families realize the American dream through home ownership.”

Wow, that seems astute until, of course, one realizes it’s middle class families that go to work to build these boats to earn the money to pay for that home ownership. The deduction is an incentive to buy boats and keeps people working.

So does this bill make any real sense when it comes to budget reform? No. It’s pure grandstanding. First, the bill would only eliminate the interest deduction when a boat qualifies under IRS rules as a second home. Notably, the bill doesn’t touch the overall second-home mortgage deduction on anything else, ranging from second homes to RVs. That’s what makes this bill nothing more than a publicity grab.

Not convinced? Then how about the use of the term “yacht.” Why not just use the word “boat”? No, can’t use “boat” because that doesn’t create the right image of a rich man’s toy.

Fact is, nobody even knows how much money might be involved. The IRS doesn’t break down second mortgage deductions into categories like vacation homes, boats, RVs or whatever. But we do know the vast majority of boats that qualify for the deduction aren’t yachts. I suppose all three lawmakers don’t realize that. More likely, they just don’t care — after all, they can still get the same publicity, so who needs facts.

Ironically, in January a bipartisan resolution was introduced in the House affirming the value and importance of the mortgage interest deduction. The resolution, H.Res. 25, states in part: “Expressing the sense of the Congress that the current federal income tax deduction for interest paid on debt secured by a first or second home should not be further restricted.” The resolution asserts that such deductions promote social and economic benefits as well as promoting security and stability.

The fact that these three congressmen all come from states with significant boatbuilding activities employing hundreds of workers makes their bone-headed bill even more unacceptable. That said, it is a bill, and Congress has been known to adopt bills that are dumber than this one. It’s time to let them know this one should go nowhere.

Comments

2 comments on “Boat mortgage interest deduction is an incentive

  1. CaptainA

    OK–I am against this bill because is specifically targets boats. I would agree with his bill if it targeted RV’s and 2nd homes in addition to boats. I do think it is a good idea to eliminate interest deductions on loans for these types of purchases because I do not agree with tax payer subsidies for non-essential purchases. The once exception to this rule should be if a boat is being used as a primary residence.

  2. Susan

    When I read this, I immediately thought of the fellow who called us last year, wanting copies of the sales order for his boat purchase a few years earlier. He was very upset that the IRS was trying to deny him taking the first time home buyer tax credit, just because he’d been deducting ‘mortgage’ interest [on his boat loan] from his tax returns. He didn’t see why he had to prove to them that this wasn’t really a home, even though he was claiming it as a home. I didn’t ask him if he was going to offer to repay whatever tax break he’d gotten those prior years, or if he thought he was entitled to take both.
    I agree with CaptainA: all 2nd home interest deductions should be eliminated. Why should the rest of us subsidize a purchase for someone wealthy enough to buy a second home. And before you start complaining about taxing the poor rich guy anymore, go read the statistics on the growing divide between those in the top 10% and the rest of us; and just how much larger their share of the pie is, and how much larger it has grown in the last decade, while real income for the ‘lower’ 90% has barely kept even with inflation.

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