In the wake of the recent congressional debt-reduction deal, there has been a lot of talk about a luxury tax as a means of generating additional revenue. But with the yachting industry based primarily out of South Florida, a luxury tax would be detrimental to Florida's already ailing economy.
Proponents of a luxury tax argue that if taxes must be increased, it should be in the form of a luxury tax because a luxury tax would target the wealthy (who, according to them, should pay more taxes than less wealthy Americans who receive the same government services). Proponents further tout the "fairness" of a luxury tax, contending that taxpayers can avoid a luxury tax by abstaining from the purchase and consumption of luxury items, such as yachts, jets, and expensive automobiles.
But "fairness" was the cornerstone of the luxury tax enacted in 1991 under the Bush Administration. Proponents of that tax contended that the 10% tax on luxury items was a proficient means of raising revenue insofar as wealthy Americans who purchase luxury items would bear the tax without financially affecting lower- and middle-class Americans.
But while the Bush Administration might have had noble intentions, the practical effect of the luxury tax of the early 1990s was to destroy jobs, spike unemployment, and dismantle the previously well-established American shipbuilding industry.
Indeed, Viking Yachts, which was the largest American shipbuilder at that time, was forced to fire more than 81% of its workforce and discontinue production operations at one of its two U.S. manufacturing facilities within eight months of the luxury tax taking effect. In addition, more than 33% of American-based yacht building companies abated production altogether during the first year of Bush's luxury tax regime.