Correct Craft CEO Bill Yeargin appeared on the BOAT BOSS podcast to discuss the proposed Canadian luxury tax on boats. During the interview Yeargin shared the history of luxury taxes previously implemented around the world, why they don’t work, and why they are harmful to both the workers who build boats and small business owners who sell and service them.
Yeargin stated, “The lessons learned from previous luxury taxes is clear; a lot of countries have implemented them and every single time it fails and is repealed. In the United States, we tried this in the early 90s and thousands of jobs were lost. The U.S. luxury tax actually created a revenue deficit for the federal government, so it was repealed quickly."
Yeargin added, “The proposed Canadian luxury tax will clearly have a negative effect, hurting small Canadian businesses the most. I hope people will help us share the past lessons, so we don’t have to repeat them.”
Click here to listen.
An economic analysis, An Economic Evaluation of the Proposed Luxury Boat Tax, conducted by Jack Mintz, Ph.D., at the School of Public Policy at the University of Calgary, in conjunction with Fred O'Riordan at EY Canada, concludes that Canada’s proposed ‘luxury tax’ on new boats will collect little revenue while threatening middle-class jobs across the country. The economic analysis finds the luxury tax would lead to a minimum CA $90 million decrease in revenues for boat dealers and potential job losses for 900 full-time equivalent employees (FTE).
The Canadian government announced in the budget last spring that it plans to introduce a tax on select items, including new boats above CA $250,000, beginning in 2022 (the government has not yet tabled legislation to confirm the date the tax takes effect). While the original proposal was to tax all boats above CA $100,000, NMMA’s strong and sustained advocacy over the past two years pressured the government to raise the threshold to $250,000.
"This report affirms what we know to be true: The proposed luxury tax is economically destructive to Canadian businesses and a self-defeating policy that will hurt middle-class workers," said NMMA Canada president Sara Anghel. "NMMA urges the Canadian government to correct course on this misguided tax within the federal budget. We cannot afford to jeopardize our fragile economic recovery by decimating our domestic industry and putting thousands of good jobs at risk at a time when we need them most."
The study’s author, Dr. Jack Mintz, writes in a recent Financial Post op-ed:
"Using a conservative measure of the impact on sales, we estimated a $29-million gain in revenues from taxing yachts — but at a loss of 900 jobs and $90 million in sales. And that may be an underestimate since some research suggests the sensitivity of yacht demand to taxation may be greater than we assumed. Our bottom line was that the luxury boat tax would raise little revenue and would largely fall on the middle-income workers, who would no longer service or manufacture high-end boats in Canada."
In 1991, the U.S. Congress passed a 10% luxury tax on all new boats sold in the U.S. costing more than $100,000. Within the first quarter of the year, sales of new boats over $100,000 plummeted 89%, resulting in massive job loss and multiple bankruptcies and plant closures.
You would think that the Canadian politicians would learn from the mistake of their neighbor. Do they even know that the U.S. tried this in the 90's?