Five Reasons Why Giving a Tax Break for Boat and Yacht Buyers is a Bad Idea

yacht draftThe Assembly voted yesterday to deliver a tax break to everyone purchasing boats in New Jersey and give the biggest benefits to folks buying yachts. The approval will send the legislation back to the governor’s desk, where it is almost 100 percent certain to be signed, since the version approved yesterday was a concurrence with the governor’s conditional veto of a previously-passed bill.

The measure would largely benefit those who are well off, with the largest tax breaks going to the uber-wealthy buying very expensive boats. And despite the assertion of the boating industry, this legislation would have a negligible positive economic benefit on New Jersey, but a real negative one, since it will take away important resources that could be invested instead in the building blocks of a strong state economy, like good schools or safe and efficient transportation networks.

Here are five reasons the tax break is a bad idea; it would:

● Deliver a 50 percent sales tax break to fewer than 1 percent of New Jerseyans – the estimated 19,000-30,000 people who buy a new or used boat each year. These are people doing well enough to be buying luxury items at a time when more and more New Jersey families are struggling to make ends meet, stay in their homes or afford food for their families.

● Cap sales tax collected on boat sales at $20,000, giving folks buying yachts – boats worth more than $571,428 – an even bigger tax break, as they’d pay $0 in sales tax on any value over that amount.

● Benefit the extremely wealthy more than anyone else. For example, the buyer of a modest $10,000 boat would get a $350 tax reduction while the buyer of a $1 million yacht would get a $50,000 tax break. And the very wealthy folks who might want to buy a luxury yacht like the Martimo M-65, assuming they pay the manufacturer’s suggested retail base price of $2,923,000, would receive a $184,610 tax break.

● Cost New Jersey between $8 million and $15.4 million a year at a minimum, according to Office of Legislative Services (OLS) estimates.

● Make New Jersey’s overall tax structure less equitable. The sales tax is already one of the more regressive parts of New Jersey’s tax code, with those who make less money paying a larger share of their income to this tax than those who make more. For example, families earning less than $22,000 pay an average of 5.5 percent of that income to New Jersey sales and excise taxes, while those with incomes over $758,000 – the top 1 percent – pay just 0.7 percent. Cutting the sales tax for luxury items would only make this worse.