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Boats, Jets Arm for Tax Fight

This might not be a good year to be a yachtsman.

Democrats have spent the past week highlighting several tax breaks that could be phased out as small but symbolic steps to raise revenue. The tax loopholes — or jobs programs, depending on which side you’re on — the party is going after include benefits for owners of boats, racehorses and corporate jets.

The list of Democratic targets appears tailored to force Republicans, reluctant to accept any kind of tax increase as part of a deal to raise the debt ceiling, to defend the lifestyles of the rich and famous.

But a swift and strong backlash from industry groups might have thrown a wrench in the Democrats’ strategy.

Industry representatives say a lot of those “luxuries” are actually enjoyed by the middle class, and they argue that taking them away could kill jobs in sectors still reeling from the recession.

Three-quarters of the nation’s boat-owning households, for example, make less than $100,000 annually, and almost all of the registered mechanically propelled boats are less than 26 feet long, according to industry data.

“Doggone it — that’s not a yacht,” said Jim Currie, the top lobbyist for the National Marine Manufacturers Association, who has met with about a dozen Capitol Hill offices to discuss the issue. “It’s all optics. It’s all about showing they’re not going to subsidize rich folks.”

Under a tax provision that applies to second homes, boat owners can deduct the interest on mortgage payments for vessels that have a bed, bathroom and kitchen and that are occupied for more than 14 days every year. Democrats say that’s a prime opportunity for modest savings.

It’s not clear how much income would be generated by ending the boat tax credit, but critics say it won’t be substantial. Only 5,600 of the boats sold last year were even eligible for that credit, and only 5 percent of boats in use actually took advantage of the deduction, according to NMMA data.

“Every dollar in tax exemptions costs taxpayers 40 cents in interest,” Rep. Mike Quigley (D-Ill.) said in a statement to Roll Call. Quigley co-sponsored a bill in May that would have done away with the boat tax credit, but an aide in his office acknowledged the legislation is languishing in committee.

The industries, suddenly on notice, have dispatched their lobbyists to Capitol Hill on a mission to explain to lawmakers that the proposals will only hurt American workers while barely putting a dent in the deficit.

The lobbyists warn that such a move could go the way of the luxury-goods tax levied in the early 1990s on yachts, personal aircraft, luxury autos and other items that was blamed for driving down sales in those industries.

Aviation industry representatives say it does not make sense that President Barack Obama could sing the praises of American manufacturing and aviation at an event in Iowa last week and then bash corporate jet owners a total of six times in a nationally televised press conference the next day.

“It was just baffling,” said Pete Bunce, president of the General Aviation Manufacturers Association. “It’s not surprising that that’s the whipping boy, but it is surprising to us that the administration and some in Congress miss the connection between the sale of these aircraft and jobs in the aviation industry.”

Last week, Bunce and R. Thomas Buffenbarger, president of the International Association of Machinists and Aerospace Workers, wrote a letter asking Obama to tone down his rhetoric, only to hear their industry singled out again Saturday in the president’s weekly national address.

Obama has urged Congress to eliminate a tax provision that allows businesses to write off the costs of their corporate jets over five years, instead of over seven years, like commercial and cargo planes. This tax benefit costs the Treasury about $3 billion every decade.

Under a similar provision that Senate Minority Leader Mitch McConnell (R-Ky.) secured in the 2008 farm bill, all racehorses currently depreciate over three years as opposed to seven.

The Senate could vote as early as Thursday on a resolution filed last week by Majority Leader Harry Reid (D-Nev.) that says taxpayers earning more than
$1 million each year should “make a more meaningful contribution to the deficit reduction effort.” The nonbinding Sense of the Senate measure is toothless, but it would force Senators to go on the record supporting or opposing tax increases on the wealthy, at least in theory. Still, the resolution does not mention any of the various tax breaks Reid’s Conference has been highlighting, and it is not clear how or if those will ever come up for a vote.

Beyond industry concerns, several lawmakers might have personal interests in avoiding the votes.

Rep. Randy Forbes (R-Va.) has a loan worth $50,001 to $100,000 on a boat, and Rep. Vern Buchanan (R-Fla.) owes $1 million to $5 million for the purchase of a Broward Yacht, according to financial disclosure forms made public last month. Rep. Dennis Cardoza (D-Calif.) owns 13 racehorses, his form showed.

None of the Members’ offices returned Roll Call’s requests for comment by press time.

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Photos of the week ending December 8, 2023