Wednesday, July 28, 2010

John Kerry's Taxes

Have you heard about the tempest in a teapot regarding John Kerry and the taxes on his yacht? (Yeah, I know -- tough times, tough times.) Apparently he recently bought a $7 million yacht (manufactured in Europe; New England shipbuilders are complaining that it could have been produced domestically, but that's another story), and instead of docking it in his home state of Massachusetts he's leaving it in Newport, Rhode Island.

The reason? Well, that all depends on who you ask. Kerry says it's better for its maintenance and upkeep to be in Newport. Others point out that if he keeps the boat in Massachusetts he'll owe about $500,000 in taxes (yikes!). That's a one-time sales tax of about $437,000 and annual excise taxes of about 70 grand. Rhode Island apparently has discovered a niche market and doesn't apply these taxes to yacht owners in its waters (or at least not to this extent), thereby benefiting its citizens who operate businesses that take care of these luxury launches.

Today Kerry has announced that he will "voluntarily" pay $500,000 in taxes to Massachusetts.

Okay, here's the surprise: I think Kerry should keep his boat in Rhode Island and not pay any taxes on it at all to Massachusetts (unless it's determined that he owes them, of course).

Taxes are necessary evils, taking money from those who earn it (well, Kerry didn't, but I'm talking in generalities) and distributing it to those who don't. Oh, sure, some things are important -- national defense and such. But I could slice and dice government down real fast and our debt problem would be a thing of the past and our tax rates would go down, too.

A $437,000 sales tax on a boat purchased overseas is piracy (ha ha). If one state has a ridiculous tax system, it should pay for it. Kerry did the smart thing (or tried to) financially, if not politically. If enough folks do what Kerry did, maybe Massachusetts would look at its tax system and decide that it's overly burdensome. Competition is good for consumers and competition between state tax systems is good for citizens.

High-tax states like California are paying dearly for their tax systems, as businesses decide in ever-increasing numbers that it is more economical to operate in lower-tax environments (like Texas). I'm not sure when we decided that no one should experience any consequences for their actions. Government today seems to be all about keeping people as insulated as possible from the results of what they do. If states have been spending at levels that are not sustainable, well, they need to deal with that. Cut programs, for crying out loud.

Anyway, I think Massachusetts should be punished for its punitive tax system. John Kerry is caving (for political reasons; I'm not really blaming him here), but he has my sympathies. I'm going to dock my yacht in Rhode Island.

More later...

[Update: I should mention that John Kerry can easily afford to pay this tax; according to this he's worth about a quarter of a billion dollars. So while I sympathize with him, it's more of a theoretical sympathy. I'm not sending him a contribution or anything.]

[Update II: I should also mention that Kerry has no problem voting for new taxes on the rest of us who are somewhat less able to pay them (or to avoid them). And for that reason I do feel a little schadenfreude. :) ]


  1. Last year, our firm did $500 worth of drawings for a Martha's Vineyard project that never went forward. MA sent us a "minimum business tax" bill of $3,500. No, there are no typos in the prior sentences. Makes you rub your hands in anticipation of doing work up there. Not!

  2. As is not uncommon, I agree with your thinking. Even more difficult to understand is the thinking behind the tax bill that "Fully Lugged" said his business received.

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