Monday, February 16, 2009

Thou Shall Not Covet

Am I the only adult in the US who remembers the luxury tax of 1991 on yachts, cars, airplanes, furs, and jewelry? Its proponents, like Ted Kennedy (D) and George Mitchell (D), crowed about how it would make the “rich” pay their fair share into the tax system and relieve the poor working man’s burden. Others eagerly joined the opportunity to get back at the wealthy.

In reality, it caused a lot of workers to lose jobs. For example, one yacht company had to downsize from two plants employing 1,500 to one plant employing 89. Multiply that by all the other small businesses catering to the luxury market and you can confidently predict a downturn since luxury purchases, by definition, can be postponed or eliminated.

Tax revenues dropped drastically since fewer goods were sold. More unemployment benefits had to be paid out. The newly unemployed paid less in income taxes. And the net effect on the tax system in 1991 was a net loss of $7,600,000 instead of the promised $31,000,000 gain, according to a report by Republicans on the Joint Economic Committee.

A mere 17 years later these same august politicians preen while castigating large companies for using corporate jets. They ignore the facts, such as:
1. The jets were probably ordered 2 or 3 years ago, before financial difficulties.
2. The jets probably save the company money because they make the corporate officers become more efficient.
3. The companies lose their deposit on the order when "encouraged" to give up the new jet purchase.
4. The manufacturer, suddenly having excess inventory when the company defaults on purchase/delivery of the new jet, will have to cut back on employees.
5. All the way down the line, the pilots, stewards, mechanics, and airports will lose revenue and be forced to cut back on employees and/or salaries as fewer jets are purchased and used.
6. More unemployment and lower revenue from income tax will lower tax revenues while delaying economic recovery.
7. The blatant hypocrisy of their own numerous, expensive, airplane junkets both at home and abroad that do little, if any, to make them more efficient. They appear to believe that the money for their perks grows on trees instead of coming from the taxpayers’ pockets.

Whatever happened to common sense and basic decency?

The luxury tax was such a flop that most of its provisions were rescinded in 1993. Apparently Kennedy and Mitchell discovered that both Massachusetts and Maine had large yacht industries.




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