Friday, February 26, 2010

Editorial: Exemptions for Planes and Boats

In the furious effort to find new sources of sales and use tax dollars, states are looking to close loopholes. They're particularly in favor of those exemptions that seem to benefit the wealthy. You know, those fat cats who we need to tax and tax and..... Yeah, them. (I'm speaking ironically here)

Two obvious possessions of those evil wealthy people (again, irony) are airplanes and yachts. And amazingly, many states have sales tax exemptions for these things. Why?

Well, the obvious (and superficial) reason is that the rotten politicians (not so much irony here) gave the wealthy some nice exemptions because they're corrupt and they like rich people. But luckily, our heroic media (more irony) find out about these exemptions and stir up action.

The deeper reason for these exemptions, which is rarely noted when the media is on the hunt for ways to nail the fat cats, is that these exemptions create jobs. Planes and boats have to be built, repaired, maintained and stored someplace. And those activities create jobs, lots of jobs. If state A, which is right next to state B, has an exemption for planes and boats, as well as all of the maintenance work and parts, than state A is going to get a lot more business for their airports and marinas than state B. Yeah, the business owners will benefit. But they'll also hire people. This is a good thing.

Since airplanes and yachts are pretty expensive items, the sales taxes won't go unnoticed. If state A eliminates the exemption, those cheap fat cats will do whatever they can to avoid the sales and use taxes. They'll find some other state, that does have the exemption. And with them go those jobs.

So, by eliminating the exemption, state A's sales tax revenue will go up. But the unemployment will go up too. And since a lot of customers skedaddled, the tax revenue won't go up as much as the politicians and media had hoped.

Politicians, the media, and the voters need to understand that sometimes tax exemptions, whether they're for sales tax, income tax, property tax or whatever, often exist not just for lining the pockets of the business owners. They usually accomplish a valid objective of providing a beneficial business environment to create and maintain jobs. And, maybe even more tax revenue in the long run.

It's funny how often I'll see this typical series of sales tax stories come out of the media. The first ones will talk about how horrible all of these sales tax exemptions are. There will be demands that, in the name of fairness, the exemptions be eliminated. Then you start to see the stories of how the businesses will be affected. Then the politicians start saying things like, "well, maybe that exemption serves a purpose. We'll keep it."

It gets tiring to watch after a while. But I do it all for you, gentle readers.

As an addendum, airplanes and ships also generally qualify for exemptions when used by common carriers.

The Sales Tax Guy

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