Online NewsHour: Effects of repeal of the federal luxury tax on boats -- January 1, 1996
KWAME HOLMAN: Joe Dockery is, in a word, rich, on this particular day, rich enough to take delivery on this 72-foot sailing yacht, custom-designed and built by Alden Yachts of Portsmouth, Rhode Island. Cost: $2 1/2 million.
KWAME HOLMAN: These are the carpenters, fiberglass, and metal workers, electricians who actually did the work...They are not rich, but their glad Joe Dockery is. His one order alone kept 20 workers employed full-time...
KWAME HOLMAN:
Joe Dockery... wouldn't even consider having his new boat built ...until Congress repealed the federal luxury tax on boats.
That tax would have cost him about $240,000, a bill he could afford but refused to pay.
JOE DOCKERY: You're being chosen as a special person to pay extra, and I didn't see the logic behind it. I found it insulting.
I was very close to building a boat in Finland, I mean, very close.
KWAME HOLMAN: According to David MacFarlane, president of Alden Yachts, ...thinks back to November 1990, when President Bush and the Democratic majority in Congress agreed to levy the luxury tax. He says he still can't believe they did it.
DAVE MacFARLANE, Alden Yachts:
I don't know anybody in the Marine industry that didn't know that there was a total disaster to start, and it's still amazing to think how somebody could come up with an idea that would shut off a business, and everybody that was in the business knew this would happen, and yet it floated right through.
KWAME HOLMAN:
The theory behind the luxury tax sounded simple enough. Congress believed anyone willing to spend $100,000 or more on a new boat surely would be willing to pay an additional 10 percent to the federal government.
(WRONG) But that didn't happen. Rather than pay the tax, many people in the market to buy a boat either didn't buy one, or bought one overseas.
As a result, the luxury tax didn't bring in much money at all, and the customers' reluctance to buy put the boat-building business, particularly here in Rhode Island, out of business. We first visited Rhode Island in June of 1992. The luxury tax had been in effect for 18 months. Tens of thousands of jobs had been lost across the country, thousands in Rhode Island alone.
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