VIDEO: Correct Craft CEO says Candian luxury tax won’t work
Bill Yeargin, CEO of US-based boatbuilder Correct Craft, has appeared on the Boat Boss podcast to discuss the proposed luxury tax on boats in Canada.
The policy would see 10 per cent to 20 per cent tax on luxury boats costing more than CA$250,000.
All boats manufactured after 2018 designed for leisure, recreation, or sport such as a yacht, a houseboat, or any sailboat or motorboat that has a cabin with sleeping amenities are considered luxury boats by the proposal. Floating homes, commercial fishing vessels, ferries, and cruise ships would be excluded.
In an interview with Kim Sweers from Boat Boss, Correct Craft CEO Bill Yeargin says that luxury taxes are appealing to politicians looking to redress rising wealth inequality, but that history shows they don’t work.
A recent economic analysis, conducted by Jack Mintz, Ph.D., at the School of Public Policy at the University of Calgary, concludes that Canada’s proposed luxury tax on new boats will collect little revenue while threatening middle-class jobs across the country.
NMMA Canada reports that the analysis found the luxury tax would lead to a minimum CA$90 million decrease in revenues for boat dealers and potential job losses for 900 full-time equivalent employees.
“There’s history with luxury taxes: a lot of times politicians see perceived inequities and they try and fix it by taxing the rich,” Yeargin says. “But there’s history with this. A number of countries have tried to do the same thing and every single time, it fails. In the United States, we tried it in the early 90s. Thousands of jobs were lost and it created a deficit for the federal government because of the sales that were lost. So, it was repealed pretty quickly.”
In 1991, the United States introduced a 10 per cent luxury tax on boats, which was designed to help solve the budget crisis. The tax was linked to a rapid decline in sales across the US boating industry, putting thousands out of work.
Yeargin goes on to say that other countries such as Spain, Turkey, New Zealand, Italy and Norway “have tried the same thing” and repealed the move within a year or two. “It would be nice if we could learn our lessons from the past,” he says. “The people that [luxury taxes] hurt are not the rich. They can afford the extra 10 per cent but it’s a principal thing, they don’t want to pay it, and the person who gets hurt is the person building the boat. They lose their jobs. Unfortunately, the politicians see the rich as an easy target.”
During the interview, Sweers adds: “People don’t realise If you purchase a boat, for half a million dollars, the economic impact in your community is US$40,000. If you go up from that you see a ripple effect.”
Watch the full interview in the video above.