Luxury Tax Redux

[captainbri]

I remember being a kid and what the tax did to the marine business

[Nicholson58]

Money especially spent on what is perceived as wealth toys is fungible. As the OP noted, the US expected windfall never happened. In addition to the loss of boat manufacturing direct jobs and manufacturers, marinas also failed.

Not noted by the OP was the punitive tax also included private aircraft and furs. The result was the failure of those industries and closure of many FBOs.

The tax never raised 1/10 of the predicted and reduced net tax by eliminating tax base on a grand scale.

When so called luxury items are unfairly and disproportionately taxed the money goes elsewhere.

Unfortunately, the tax on boats exacted disaster on those without other homes, living aboard. Many of us retired folks, fixed incomes, were hosed big time. Under this logic, any homeowner should get the punitive tax as well, political suicide. That group has votes, boaters are insignificant.

[redneckrob]

Originally Posted by Nicholson58

Money especially spent on what is perceived as wealth toys is fungible. As the OP noted, the US expected windfall never happened. In addition to the loss of boat manufacturing direct jobs and manufacturers, marinas also failed.

Not noted by the OP was the punitive tax also included private aircraft and furs. The result was the failure of those industries and closure of many FBOs.

The tax never raised 1/10 of the predicted and reduced net tax by eliminating tax base on a grand scale.

When so called luxury items are unfairly and disproportionately taxed the money goes elsewhere.

Unfortunately, the tax on boats exacted disaster on those without other homes, living aboard. Many of us retired folks, fixed incomes, were hosed big time. Under this logic, any homeowner should get the punitive tax as well, political suicide. That group has votes, boaters are insignificant.

If you already own a boat, how does a tax on purchase of a new boat "hose" you? And what in the world does the fact that your income is assured have to do with anything, most folks would love to have an income that won't go down or go away at a moment's notice!

[Nicholson58]

Originally Posted by redneckrob

If you already own a boat, how does a tax on purchase of a new boat "hose" you? And what in the world does the fact that your income is assured have to do with anything, most folks would love to have an income that won't go down or go away at a moment's notice!

In the US, the previous ridiculous tax was an annual property tax on the imputed value of the boat. This exceeded the rate on any home. It was an absurd attack.

[Macblaze]

Originally Posted by Nicholson58

In the US, the previous ridiculous tax was an annual property tax on the imputed value of the boat. This exceeded the rate on any home. It was an absurd attack.

Well that pretty much makes any comparison of the Canadian luxury tax to the "ruinous" American version null and void. Actually it seems to me me increasingly obvious that the America taxation system is a completely different beast than the one we have here in Canada.

[redneckrob]

Originally Posted by Nicholson58

In the US, the previous ridiculous tax was an annual property tax on the imputed value of the boat. This exceeded the rate on any home. It was an absurd attack.

Neither the previous U.S. luxury tax or the one we're discussing here work/worked that way, sorry that's just completely incorrect. They both only added a tax to the initial purchase of a new boat over a certain value. Specifically the US tax was an excise tax, levied on the first sale of certain goods. There seems to be a lot of confusion or perhaps purposeful conflation on this thread of wealth taxes, which these are not, and sales taxes on new items, which these both were/are.

Also interesting to note how this thread has demonstrated how tricky memory is where people are sure the U.S. tax killed the Canadian boat building industry which died several years prior, sure they remember getting hosed by a wealth tax when it only applied to initial purchase of new boats, and sure that the top 10% make 40% of the money but pay 73% of the tax even though they can't find any evidence of that oddly specific claim.

Perhaps the beliefs formed on the basis of these memories could benefit from some re-evaluation?

BTW, also still unclear about why someone with the luxury of knowing their income won't go down or go away is someone we should be feeling bad for?

[Macblaze]

Originally Posted by redneckrob

Neither the previous U.S. luxury tax ... work/worked that way,

Oh. That makes much more sense...

[peter loveridge]

not as far as I know. Most of the fishery in NS is "'owner operator" but this is occasionally subverted. I don't know any individual fisherman who isn't incorporated. I don't think the industry is zero rated for HST, but if its paid, they can claim it back

[Mike OReilly]

Originally Posted by peter loveridge

not as far as I know. Most of the fishery in NS is "'owner operator" but this is occasionally subverted. I don't know any individual fisherman who isn't incorporated. I don't think the industry is zero rated for HST, but if its paid, they can claim it back

Thanks Peter. I'm somewhat aware of the Newfoundland operations, which are similar. Most boats are owned by families or small owner-operator groups. But all are incorporated.

Luxury taxes don't usually apply to items bought for business use. I can't find confirmation that this is the case with this new tax, but I'd be shocked if it applies to fishing vessels bought by licensed fishers. As you say, HST is also recouped in a business purchase.

I continue to view the opposition here as a tempest in a tea pot. The American example is only peripherally applicable. This is not the "sky is falling" disaster that some want to make it out to be.

It's not going to raise significant funds, and may have other unintended consequences, such as increasing sales of boats just under the $250k threshold. My sense is the move is largely symbolic, which is consistent with how our current Federal government tends to lead: mostly symbolically .

[danstanford]

Originally Posted by Mike OReilly

I continue to view the opposition here as a tempest in a tea pot. The American example is only peripherally applicable. This is not the "sky is falling" disaster that some want to make it out to be.

It's not going to raise significant funds, and may have other unintended consequences, such as increasing sales of boats just under the $250k threshold. My sense is the move is largely symbolic, which is consistent with how our current Federal government tends to lead: mostly symbolically .

I agree with you Mike that the actual impact will be minor on the tax revenue front. Where these things drive unintended consequences is on the consumer confidence front. If you imagine the true engine of the economy as consumer spending of all types, any threat to that confidence is potentially very damaging to sustenance or recovery of the economy.
Virtue signaling and symbolic gestures can be planks in a path either direction from a spending decision. My decision to invest in a new machine or production process hinges on my belief that the consumers will continue to knock on my door in similar numbers to last (insert your time period here) year. My decision, if negative, impacts the supplier of the machine and their suppliers to the electricians, millwrights, engineering firms, inspectors, and employees to be hired. Keynes says the dollars recycle 10 times and though I have always been skeptical about that number I know it is up there.
What I do know is that each of these cycles generates tax revenue from essentially nothing instead of coming from "stimulus funds" financed with borrowed money and that isn't nothing in the grand scheme of things.

[Group9]

A lot of the people in government, having never run a business, have the mentality that if you just charged double for a product, you would make twice as much money, and no other factors could possibly affect that outcome.

And, they treat taxes the same way. They believe that if you raise them on something, people have to pay them. There is nothing else they can do (and, they would certainly never change their behavior to avoid a tax).

There is a famous line from the ruling in the second case every heard by the U.S. Supreme Court (McCulloch v. Maryland). That line is, "The power to tax, is the power to destroy."

[boatpoker]

Given the staggering debt load the Canadian Government and Canadian individuals are carrying right now, the only guarantee is that our tax system will soon change ... I feel sorry for my kids and grand kids.

[danstanford]

Originally Posted by Group9

A lot of the people in government, having never run a business, have the mentality that if you just charged double for a product, you would make twice as much money, and no other factors could possibly affect that outcome.

And, they treat taxes the same way. They believe that if you raise them on something, people have to pay them. There is nothing else they can do (and, they would certainly never change their behavior to avoid a tax).

There is a famous line from the ruling in the second case every heard by the U.S. Supreme Court (McCulloch v. Maryland). That line is, "The power to tax, is the power to destroy."

To compound this issue these same people will make personal purchasing choices and public purchasing decisions with no weighting to any of these socially responsible elements. In other words, they will buy a cheap item made somewhere that contributed nothing to our tax base or has any conformance to our environmental rules and then complain that domestic manufacturers just need to step up on wages, taxes, and carbon.

[boatpoker]

Originally Posted by danstanford

To compound this issue these same people will make personal purchasing choices and public purchasing decisions with no weighting to any of these socially responsible elements. In other words, they will buy a cheap item made somewhere that contributed nothing to our tax base or has any conformance to our environmental rules and then complain that domestic manufacturers just need to step up on wages, taxes, and carbon.

or ... they will pour billions into Canadian entities that will fast shuffle the money offshore i.e. SNC, Bombardier, Trudeau Trust, Canada Steamship Lines, Wei Wei.