yacht tax

New Yachts



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In 1990, members of the Democrat-majority of the United States Congress introduced a bill that would impose a large luxury sales tax on yachts.

During congressional debates, the bill’s proponents contended that, in purchasing yachts — a useless, luxury toy — the super rich was wasting precious resources and money; money which could be put to better use by the government.

The bill passed and became law in 1991.

When the luxury tax on new yachts (but not on old yachts) went into effect, sales of new boats throughout America plummeted. Potential customers instead refurbished what they already had or spent their money on other goods.

As a result, most of the yacht building industry went bankrupt.

That industry, moreover, consisted of more than 90,000 carpenters, painters, sail makers, hull builders, electricians, plumbers, craftsmen, artisans and others who work in teams and cooperate in building these boats.

And it was these skilled craftsmen, most with no other skills or way to earn a living, who were thrown out of work. Many ended up on unemployment benefits.

Public outcry over what had happened became so loud, and the revenues generated dismal, that Congress swiftly repealed the legislation in 1993.

But not before it had wreaked havoc to countless small towns where yacht building was the mainstay of the local economy, and to the families of the blue-collar workers whose lives had been turned upside down in the process.

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1. The Republicans in the US Congress introduced a bill that would increase the sales tax on new yacht purchases. True or false? What does this say about the Democrats and Republicans in the US?

2. Why did US lawmakers introduce and approved the bill?

3. After the bill came into effect, did the government collect lots of tax revenues from yacht sales? Why didn’t it collect much more tax revenues?

4. Did the new law have positive or negative consequences?

5. The law was repealed. Is this correct or incorrect? Was it a “mistake”?

6. Is there a moral or lesson to the story?

7. Do you think the writer is a liberal, moderate or conservative? Is he or she left, center or right? Does he or she have a political agenda?


A. Do only rich people buy and own yachts? What about boats?

B. Are yachts or boats popular in where you live? Where are these boats?

C. What do rich people do with their money? How do they spend their money? What do they buy?

D. What do you think of luxury or sales taxes? Should there be sales taxes instead of income taxes?

E. Should taxes in general be higher, lower or remain at the current level?


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