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.