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New Anti-boater Federal Bill

Rick D

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Jun 14, 2008
6,779
Hunter Legend 40.5 Long Beach, Shoreline Marina, CA
House Resolution 1702, the so-called “Ending Taxpayer Subsidies for Yachts Act,” was introduced May 3 by Reps. Mike Quigley, D-Ill., Tim Walz, D-Minn. and Gary Peters D-Mich. It would amend a federal tax provision established by Congress in 1986 that allows boat owners to write off boat loan interest payments if their vessels qualify as second homes.

While we're on the subject of increased cost to boaters, see this bill which would eliminate your tax deduction. IMHO, none of these measures are necessarily deal- breakers, but together they may cripple our sport / recreation. I really don't care so much about how upset we are. What is a lot more important is to send your comments to your elected congressional and senatorial representative!
 
Sep 25, 2008
5,511
Alden 50 Sarasota, Florida
The problem of our ever increasing debt and deficit must be addressed and this is just another unpleasant expense a small segment of our society, boat owners, may incur. The fact that most folks have the perception boat owners are "rich" does us more harm than good in trying to fight this instance of debt reduction however small.

This is but another proposal to fix our economic problem. There are a myriad of other proposals, many of which affect us in other ways or for other reasons unrelated to boats. Personally, I feel that if everyone objected to the specific proposals which affect them personally, nothing would get done and especially so in this Administration which is why it seems we should all be willing to step up and not object to such a proposal.
 

Rick D

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Jun 14, 2008
6,779
Hunter Legend 40.5 Long Beach, Shoreline Marina, CA
Don, I may surprise you in that I don't disagree. Here's the 'but-for': it should be applied equally to second homes RV's et al. What we need is comprehensive tax reform and not these feel-good micro-steps. I have no problem dragging the other guys into the swamp too and would like to have us support and contribute (read $$$) into that effort.
 

Rick D

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Jun 14, 2008
6,779
Hunter Legend 40.5 Long Beach, Shoreline Marina, CA
OK. Moderator...

...this is a purely political post, but certainly boater-related. Beats me where this should fall.
 

Rick D

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Jun 14, 2008
6,779
Hunter Legend 40.5 Long Beach, Shoreline Marina, CA
And, While I'm On A Rant...

... why the hell should I read this first on a local newspaper instead of my national lobbying organization (BUS)?
 

Faris

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Apr 20, 2011
232
Catalina 27 San Juan Islands
With teachers jobs being cut, it's hard for me to feel too bad about this. If you haven't noticed, every sector is being hit by budget problems. If a person has enough money for anything that could be considered a second home, I'm not going to lose much sleep if they don't get a tax break for it. No matter how you slice it, except in a few VERY rare cases, a second home, of any sort, is a luxury. Giving a tax break for this is, in effect, a government subsidy.

This is not an anti-boater bill. In fact, it has very little to do with boating at all. I can think of only two people I personally know who would be effected by closing this loophole. I know that one of them would be wholeheartedly in favor of it. The other one can definitely afford it and he won't even notice the difference. Neither of them are going to worry about putting food on the table whether this passed or not. I personally know three teachers at risk of losing their FIRST homes because of budget cuts.

Nope, not too worried about this.
 
Oct 1, 2007
1,426
Hunter 44DS Pt. Judith
What is largely not at all understood by tax and spend advocates is that when you tax anything, regardless of what it is, and make no mistake, this is a tax, you reduce consumption. So at the margin, this tax will reduce the sale of boats as people who could afford to buy a boat with the tax deduction for the interest on the loan, will not. And this segment of the economy will take a hit, which ripples down through all boat builders and their supply chains. This is precisely why the housing industry gets all in a twitter when the congress talks about ending the tax deduction for home mortgages. Ask the owner of a small business building boats whether this tax is a good idea. We have to move beyond class warfare if we are ever to be solvent as a country. Taxing a fragile economy more is not the answer.
 

Tim R.

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May 27, 2004
3,626
Caliber 40 Long Range Cruiser Portland, Maine
I can deduct the interest on my mortgage for my primary residence if it is a house. Well, my boat is my primary residence. This bill would take away all deductions for me. Fortunately I own my boat outright but they should have a provision for folks who use their boats as their primary residence.

Also, in my experience, not everyone knows about this deduction so they will not miss it. I also do not believe this will stop most anyone from buying a boat. For most, a boat is an emotional purchase. The deduction was simply a bonus.
 
Apr 8, 2010
1,600
Frers 33 41426 Westport, CT
Tim R. said:
I can deduct the interest on my mortgage for my primary residence if it is a house. Well, my boat is my primary residence. This bill would take away all deductions for me. Fortunately I own my boat outright but they should have a provision for folks who use their boats as their primary residence.
Didn't it say eliminate tax breaks only for boats that qualify as SECOND homes? I would interpret this to mean your first home boat deduction still applies.
 
Jan 22, 2008
280
Hunter 25_73-83 NORTH POINT MARINA/WINTHROP HA IL
What is largely not at all understood by tax and spend advocates is that when you tax anything, regardless of what it is, and make no mistake, this is a tax, you reduce consumption. So at the margin, this tax will reduce the sale of boats as people who could afford to buy a boat with the tax deduction for the interest on the loan, will not. And this segment of the economy will take a hit, which ripples down through all boat builders and their supply chains. This is precisely why the housing industry gets all in a twitter when the congress talks about ending the tax deduction for home mortgages. Ask the owner of a small business building boats whether this tax is a good idea. We have to move beyond class warfare if we are ever to be solvent as a country. Taxing a fragile economy more is not the answer.
Rick486's explanation is well written and to the point. I would, however, like to add one remark to his excellent logic and that is this is not a political matter but one of elementary economics and when people who have little or no understanding of the most basic principles of economics (The sponsors of this bill and the respondent Faris) allow their political beliefs to skewer their reasoning, the end result is always wrong. As Thomas Jefferson so eloquently stated: "Without an intelligent electorate, Democracy is doomed to fail." Best, Ron
 

Faris

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Apr 20, 2011
232
Catalina 27 San Juan Islands
What is largely not at all understood by tax and spend advocates is that when you tax anything, regardless of what it is, and make no mistake, this is a tax, you reduce consumption.
This is an economic fallacy that gained a lot of traction in the Reagan years but which has been repeatedly debunked. Yet, it's repeated enough that people assume it to be fact. It's used to prop up another debunked fallacy - trickle-down economics.

It's known as the threshold effect (among other names). It basically states that among people of limited means, raising the cost of owning a good/service which is not perceived as necessary, there is a reduction in consumption. However, with items that are considered necessary and for people with less limited means, this effect is not observed until a certain threshold is reached.

At one end of the spectrum, consider gasoline and cigarettes. Raising the price of either does not have an appreciable effect on consumption except at the very lowest income levels (those below the threshold). The price has to be raised considerably before consumption is affected. (I think we finally reached that with gasoline.) This is because the consumption rate is pretty solidly fixed for these items, and is not affected by small increases in cost.

At the other end of the spectrum, we have high-ticket items (such as a boat large enough to be considered a second home). These are subject to the same principle applied at a much higher threshold. That is, let's say I own a $100,000 boat that costs me $10,000 per year to keep. If I add $100 to that annual cost, it is most likely below the threshold. That is, it won't affect the consumption rate - those that can afford $10,000 can also afford $10,100, and the difference will not affect their decision.

Now, the nice thing about taxing a luxury item, such as a boat large enough to be considered a second home (which right away reeks of tax fraud anyway in most cases), is that it is applied as a rate. That is, if I'm a working man with a $50,000 boat that I struggle to keep on the water, the impact will be low. However, if I have a million-dollar boat, the impact will be higher - but proportionately the same.

What is wrong with the economy is the erosion of the middle class. This is partially due to the fact that the wealthy (those who do not worry about paying rent or putting food on the table) pay proportionately lower taxes as compared to the cost of living. (As a side note, I'm not saying that taxation is the greatest problem. The greater problem is low investor confidence, meaning that the wealthy are hoarding their money - not investing it in activities that produce jobs in this country. It always happens after a period of frantic speculative over-investment.)

So, tax money has to come from somewhere. The government is making cuts (not necessarily in the right places), but still, our economy and way of life depend on government. Sorry libertarians, but it is true. You would live in a VERY different country without big government - and not as utopian as you might imagine. There's a very good reason we don't see any examples of economically successful countries without a substantial tax rate and broad government - it doesn't work. Instead what we see is when the government starts to go broke and becomes less effective, the country circles the drain.

And, if tax money has to come from somewhere, and the working class is struggling to meet basic needs, where should that money come from?

As for this affecting the boat industry and this "trickling down" and harming the economy - this would be true except for a two important points:

  • These margins are exceedingly narrow at the high end. This means that there just aren't very many purchase decision that are affected. That is, the consumption just doesn't drop proportionately.
  • Money doesn't, as some pseudo-economists would have you believe, just disappear. So, let's say that someone decides not to by that $100,000 boat because the tax pushes them over the edge on a purchase decision. Where does that money go? The trickle-down effect Rick mentions only has an impact on the economy if it wasn't spent or invested - if the money just disappeared.
The fact is, small increases in cost do not have much of an effect on high-end luxury items. And, as I mentioned, if a person decides not to purchase a boat, they will spend it somewhere - on something that creates jobs for someone.

Before you assume that I do not understand economics, you should think through your position more carefully. It is based on 30-year old fallacies that most modern economists have rejected. You should also probably get a PhD in economics and teach macroeconomics at a university for almost a decade. That's what I did. It's helped me quite a bit.

Or, you can just turn on Fox News and accept whatever they say. That's certainly easier. A little hint though: It's not true.
 
Oct 22, 2005
256
Hunter 44DS Redondo Beach, CA
This bill only has two co-sponsors (both Democrats). It's not going anywhere, especially not in a Republican house.
 
Jan 22, 2008
280
Hunter 25_73-83 NORTH POINT MARINA/WINTHROP HA IL
Economics is a social science akin to Psychology, Sociology. It is not a hard science like Physics or Mathematics. Therefore, economists deal with theories that are not always certifiable nor quantifiable in real life conditions. And, there are as many theories of economics as there are philosphies of Man:John Stuart Mill, Karl Marx, John Meynard Keynes, Niall Ferguson, Ben Bernanke all represent schools of economic theory to name a few. To discount a valid economic approach because it is not accepted by "modern economists" is akin to justifying the superiority of Rap music to Wagner, Bach, Beethoven, and Mozart because it is not mainstream music today. And, when one pontificates that another's economic theory "is not true" because it does not coincide with your own political vision of economics, you resort to intellectual pandering and sophistry. A book could be written disputing any and all of Faris' response, but this is not the place for that type of discussion. History repeats itself. Permissum verum exsisto notus-Let the truth be known. Best, Ron
 

Rick D

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Jun 14, 2008
6,779
Hunter Legend 40.5 Long Beach, Shoreline Marina, CA
True

This bill only has two co-sponsors (both Democrats). It's not going anywhere, especially not in a Republican house.
Yea, I heard from the BUS folks who did not put out an alert because this is something that may be handled without a lot of thunder and lightning. Sorry I stirred the pot perhaps prematurely. I must be getting thin-skinned. They will issue a member alert if this thing gets traction.

I really do believe we need a comprehensive tax reform that eliminates most deductions. There have been several smart proposals over the years, but as our issue illustrates, it isn't likely to happen soon.
 
May 11, 2005
3,431
Seidelman S37 Slidell, La.
Amazes me

It continues to amaze me that congress is always talking tax increase, of one kind of another. You would think that the last election would have gotten their attention, and they would at some time begin to think about spending cuts, as opposed to more taxes.
 

Faris

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Apr 20, 2011
232
Catalina 27 San Juan Islands
I really do believe we need a comprehensive tax reform that eliminates most deductions.
So true. I think there is almost unanimous consent for this. Frank Ahrens put it best when he wrote, "I don't know anyone who pays taxes who thinks, "Wow. This system is terrific! It's easy to figure out and fair to me, my family and my business!"
 

Faris

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Apr 20, 2011
232
Catalina 27 San Juan Islands
It continues to amaze me that congress is always talking tax increase, of one kind of another. You would think that the last election would have gotten their attention, and they would at some time begin to think about spending cuts, as opposed to more taxes.
You have to appreciate that the previous administration dug a huge hole. There are only two ways to get out of this hole: raise more revenue or spend less money. People kick and scream whichever you do. There aren't many options available since the big-ticket items and meaningful tax reforms are put off-limits either by constituent pressure or lobbyist pressure. That's why we see weak proposals - everything worth doing is blocked. No one is ready to do what's necessary.

Side note: It may surprise you to know that the last election was fueled to a significant degree by liberals who were punishing Democrats for not being liberal enough. The liberal majority (and yes, per the issues, they are in a majority), pinned a lot of hope on the last two election cycles to clean up the mess put in place by a conservative feeding frenzy. When Democrats failed to do things like single-payer health care (supported by the vast majority), they were punished by progressives who simply did not turn out. Taxation and spending was only an issue for a fringe minority.

By the way, this was a brilliant political maneuver on the part of the Republicans. They have simply been blocking everything the Democrats try to do, understanding that this will erode progressive support of that party. It's going to backfire, though, as they have no platform for 2012. Right now, they are simply the anti-Democrat party. They haven't come up with an idea that had broad public support in a very long time. I don't think they can come up with one.

Democrats are no better off. They've got great ideas, but no political will/backbone to see them through. It is high time for a viable third party, but it is surely not the Tea Baggers. Most people recognize them as fringe and no one takes them seriously.

I propose the Boat Drink Party and we'll get Jimmy Buffett to run on the slogan, "Come Monday, it'll be alright."

Now, I've got some sailing to do ...
 
Apr 8, 2010
1,600
Frers 33 41426 Westport, CT
Faris said:
Democrats are no better off. They've got great ideas, but no political will/backbone to see them through. It is high time for a viable third party, but it is surely not the Tea Baggers. Most people recognize them as fringe and no one takes them seriously.

I propose the Boat Drink Party and we'll get Jimmy Buffett to run on the slogan, "Come Monday, it'll be alright."
That's what I have been saying for years (but the part with jimmy leading it is a great twist)!!!!
 
Apr 23, 2011
0
Catalina 27 Bayview,ID
Hey, new to the site and new boat owner (Catalina 27).

I agree with a lot of the posts that this deduction is not motivating factor in buying (financing) a boat. I also don't really have an issue with the deleting of the deduction; however, I know more people that use this deduction for motorhomes and if it is disallowed for boats it should also be disallowed for motorhomes. As always seems, politicians do not always consider what equal in comparison to what needs to be done. It is unfortunate that is probably the pressure of the lobby of the motorhome (RV) community that has somehow sidestepped this proposal. Both, motorhomes and boats should be considered in the same "family" for this type and probably most tax issues.

~ Kyle