Despite Tax-the-Rich Plans, Congress May Repeal Luxury Tax
TWELVE minutes after the 103rd Congress convened early this year, there was a proposal to repeal the luxury tax on yachts costing $100,000 or more. By the end of the day there were five separate proposals to repeal the tax, including several proposals to repeal the levy on all luxury items covered - yachts, furs, jewelry, planes, and cars.
"The luxury tax has been a miserable failure," said Rep. Bob Stump (R) of Arizona, who wants to eliminate all the taxes.
Advocates of revoking the tax, especially the one on yachts, say it will easily pass Congress. The legislature has already revoked the yacht tax twice, but in broader tax measures vetoed by President Bush, who also favored its repeal.
This time, however, proponents of eliminating the tax believe it will be signed by President Clinton. In the last Congress, both Senate Majority Leader George Mitchell (D) of Maine and Sen. Lloyd Bentsen (D) of Texas, now Treasury secretary, supported repeal for yachts. A spokesman for Mr. Bentsen says it's too early to know if repeal will be part of Clinton's budget package.
However, even proponents of the repeal admit it will look funny for Mr. Clinton to repeal a tax bill aimed at products bought by the rich at the same time as he enacts new taxes on them. In the campaign, Clinton called for legislation raising the tax rate on anyone earning $200,000 or more and adding a surcharge on millionaires.
If the president approves ending the luxury tax, it will make reducing the deficit, one of his chief worries, a bit tougher.
The Joint Committee on Taxation originally estimated the tax would bring in $1.5 billion over its five-year life span. The repealers say it never did. "Rather than increase the nation's revenues, it has reduced them," Rep. Stump stated.
Well, not quite.
According to the Internal Revenue Service, the total tax brought in $98 million for fiscal year 1991 and $154 million for fiscal year 1992 (through the quarter ending March 31). Although that is not much money in terms of the Federal budget deficit (now running at over $300 billion), it is revenue. Thus, Congress must find an "offset" to replace the repealed tax.
Rep. Olympia Snowe (R) of Maine, in her repeal bill, reduces the oil depletion allowance for independent oil drillers as her offset. Maine has few independent oil drillers but it does have a lot of boat builders. "This tax has cost Maine a lot of jobs," says a Snowe spokesman.