In this second part of the halftime report for Tax Foundation Forum: Making Sense of Profit Shifting, we discuss the key takeaways from the first half of our series on profit shifting (read part I here). In this post, we...
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- Kerry has Kennedy to Thank for Yacht Tax Savings
Kerry has Kennedy to Thank for Yacht Tax Savings
In an amusing bit of muckraking, the Boston Herald accuses senior U.S. Senator John Kerry of deliberately avoiding the payment of Massachusetts state sales and excise taxes on his beautiful new yacht by buying and keeping it in Rhode Island.
One of the legislators who made Rhode Island safe for yachtsman is Rep. Patrick Kennedy. Recognizing that when luxury taxes on yachts were enacted as part of the 1990 budget deal, they hurt the Rhode Island boat industry, he fought in Congress for more pro-yacht legislation in 1998 and 1999. As he described it in the pages of the Tax Foundation's Tax Features:
The centerpiece of the legislation is a 20-percent tax credit to anyone who buys a new custom luxury vessel, of at least 50 feet in length, in the United States. For example, if an individual purchases a $250,000 custom yacht, that person will receive a credit against his federal income taxes of $50,000.
Senator Kerry's yacht would have qualified, but alas, the majority House Republicans didn't support Kennedy's bill.
When it comes to voluntary tax payment, Massachusetts has a record of asking but not receiving. When voters in a 2000 referendum cut the income tax rate from 5.9% to 5.0%, the legislature told the Department of Revenue to include a line on subsequent income tax forms that would give taxpayers the option of paying at the old, higher rate if they wanted to. In 2006, 3.24 million personal returns were filed in Massachusetts, and 1,162 people actually opted to pay the higher rate, bringing in a total of $189,143 in extra tax revenue. As you can tell from the small amount collected, Senator Kerry wasn't one of those volunteers.
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