We need to get a majority of the electorate involved on all new taxes and fees because, once they are in government, elected officials LOSE ALL COMMON SENSE. They will do ANYTHING to curry favor with an interest group critical to THEIR political future. Case in point, from todays George Will column:

In 1990 there were no luxury excise taxes, all of them having been repealed in 1965. But perhaps every quarter-century or so government - it cannot help itself - must go on a "fairness" bender, the memory of the hangover from similar misadventures having faded.

In 1990, the Joint Committee on Taxation projected that the 1991 revenue yield from the luxury taxes would be $31 million. The actual yield was $16.6 million. Why? Because - surprise! - the taxation changed behavior: Fewer people bought the taxed products. Demand went down when prices went up. Washington was amazed. People bought yachts overseas. Who would have thought it?

According to a study done for the Joint Economic Committee, the tax destroyed 330 jobs in jewelry manufacturing, 1,470 in the aircraft industry and 7,600 in the boating industry. The job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. So the net effect of the taxes was a loss of $7.6 million in fiscal 1991, which means the government projection was off by $38.6 million.

This illustrates the shortcomings of "static analysis." Concerning which, consider an imaginary case.

It has been calculated that if the federal government imposed - in the name of fairness, of course - a 100 percent tax on all the earnings, from the first penny, of all millionaires, which is to say if the government confiscated all their earnings, the sum would suffice to run the government for just six weeks. The problem with that calculation is that it reflects "static analysis." That is, it does not allow for behavioral changes the tax would provoke: No one would earn the one-millionth dollar, thereby triggering the confiscation, so the revenue yield from the 100 percent rate on millionaires would be zero.

But back to reality. "Practical politics," Henry Adams famously said, "consists in ignoring facts."

But facts are famously stubborn things, particularly when they involve unpleasantness for one's constituents.

In 1993, Congress repealed the excise taxes on boats, aircraft, jewelry and furs. It also indexed, phased down and scheduled the expiration of the tax on cars.

Now comes Kennedy with "The Boat Building Investment Act," which he calls "exactly the opposite of a luxury tax." Indeed it is.

Its centerpiece is a 20 percent tax credit for purchasers of American-made luxury yachts over 50 feet long. So the purchaser of a $1 million yacht would get a $200,000 credit against his federal income taxes.

However, this would not be an unlimited benefit for the upper crust. The credit would be capped at $2 million, so the government would help only with the first $10 million that a purchaser spends on a yacht.

You probably have not heard of Kennedy's legislation. Do you think you might have heard a media uproar about it if its author were a Republican? Just a thought.

Kennedy says America lags behind other nations in "supporting" boat manufacturers, so this bill also would spend $25 million annually on "export assistance" - for example, marketing American-made yachts at overseas expositions - and training employees of America's yacht-builders.

This is necessary, Kennedy says, to "continue the revitalization" of the industry after the "near-fatal experience when the luxury tax was implemented."

This legislation is a matter of fairness, says Kennedy, who acknowledges that hitherto he has supported "targeted tax cuts" targeted at people of modest means. But his proposal, as he explains it, is really sort of like that. The benefit of up to $2 million for each purchaser of a luxury yacht would benefit the nearly 6,000 Rhode Islanders working in the state's more than $1 billion a year boatbuilding industry and workers elsewhere.

http://www.tribnet.com/

-- Craig Carson (craigcar@crosswind.net), October 28, 1999

Answers

Craig- I didn't believe it was you. I thought that it was zowie hosing us. But danged if I didn't find it on a web search:

This Act may be cited as the `Boat Building Investment Act of 1999'. SEC. 2. CREDIT FOR PURCHASE OF LUXURY YACHTS CONSTRUCTED IN THE UNITED STATES. (a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 30A the following new section: `SEC. 30B. PURCHASE OF LUXURY YACHTS CONSTRUCTED IN THE UNITED STATES. `(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 20 percent of the cost of any new domestic luxury yacht purchased by the taxpayer during such year. `(b) MAXIMUM CREDIT- The amount of the credit allowed by subsection (a) with respect to any yacht shall not exceed $2,000,000. `(c) NEW DOMESTIC LUXURY YACHT- For purposes of this section, the term `new domestic luxury yacht' means any yacht if-- `(1) the yacht is more than 50 feet in length, `(2) substantially all of the value of which is attributable to value added in the United States, `(3) the original use of which commences with the taxpayer, and `(4) the yacht is designed, built, documented, and registered in the United States. `(d) APPLICATION WITH OTHER CREDITS; CARRYOVER OF EXCESS CREDIT- The http://thomas.loc.gov/cgi-bin/query/z?c106:H.R.677:

-- Mark Stilson (mark 842@hotmail.net), October 28, 1999.

Just to review the bidding for those who came late:

1. We had some viable small ship-builders quietly working and paying taxes. 2. We initiated the politics of envy to attempt to take $31 million from the idle rich. 3. We killed the small ship builders. By the time the dust settled, it COST us $7.6 million more than just doing nothing. 4. One of those who has most frequently invoked the politics of envy, now wants the TAXPAYERS to pony up $25 million A YEAR and give the idle rich payments of up to $2 million PER YACHT to undo the damage.

Damn! I CAN SEE why the public is too ignorant to get involved in tax decisions. They might make decisions that weren't reasonable.

-- (mark842@hotmail.com), October 28, 1999.