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February 19, 2008

Tax And Budget Priorities: Schools No, Yachts Yes

-- by Dave Johnson

This post originally appeared at Speak Out California.

Do you know about the California yacht tax loophole? Here is how it works: Regular people like you and me have to pay sales taxes on the things we buy, even on big items like cars. We even have to pay these taxes if we buy outside of the state. (Technically that is called a "use" tax.)

But California has a special tax loophole just for the things rich people buy. That's right, if you buy a big yacht, airplane or "luxury recreation vehicle," you don't have to pay sales tax. The way this loophole works is, you buy it outside the state, hold it there for three months, and then you have a sales-tax-free yacht.

Summary: Regular people pay sales taxes, rich people don't have to.

Last week there was a budget battle in Sacramento that resulted in a number of cuts that will have a big impact on regular Californians. But the Republicans held firm and blocked attempts to do away with the tax loophole that lets rich people get out of paying the taxes that the rest of us have to pay.

From Saturday's San Jose Mercury News, Cuts hit schools, social services, MORE TRIMS LIKELY; GOP BLOCKS YACHT-TAX BILL,

"... lawmakers Friday chopped more than $2 billion from state programs, with schools, social services and health care providers that serve the poor taking the biggest hits."
That's right, more than $500 million was chopped from our schools! Meanwhile,
"Republican lawmakers in the Assembly voted down a proposal to close a loophole in the so-called "yacht tax," which allows people who buy yachts or planes to store them out of state for three months to avoid state use taxes."
Summary (in case you missed the point): Regular people pay sales taxes, rich people don't have to.

At California Progress Report, Frank Russo explains, "The California Senate passed a repeal of a loophole that allows the multimillionaire purchasers of yachts and private planes from paying a sales or use tax." But the Assembly failed to pass this because of "the opposition of most elected Republicans."

Just to short-circuit the usual arguments about taxes, Frank Russo notes that the Legislative Analyst's Office looked into this and found no change in yacht and plane sales from times when the tax is collected to times when it is not.

As Russo explains, the fight over closing this loophole occurred just after "... medical, dental services, and other programs for children were cut and cost of living increases delayed for the blind, aged, and disabled poor who qualify for Social Security."

Here is what I want to know: Why in the world are the Republicans so confident that they can get away with this?

It is generally understood that the average citizen has been fed enough unanswered anti-tax and anti-government propaganda that they reflexively oppose taxes. (The operative word there is "unanswered.") But this is a very different thing. This is a special exclusion, just for rich people, that one way or another has to be made up for by the rest of us! Why aren't the people of California more upset about this?

The only conclusion I can reach is that the Republicans understand that regular people are not going to find out about this! And they may well be correct. Yes, the story was in a few newspapers, but really, who reads newspapers? This is not how large numbers of regular people get their information about politics in California. They get some of it from TV news, but I really fear that most people in California get their information about the issues facing the state from ads that run during prime-time television shows. And I think that conservatives understand this, while progressives/liberals do not quite "get it."

For example, if regular people were accurately informed about California issue, then people would understand that most of the factors that were used as justifications for recalling Governor Gray Davis are today almost the same with Governor Schwarzenegger. One big difference I see is that the energy companies are not running an ad campaign blaming Governor Schwarzenegger for anything, they way they ran ads blaming Governor Davis for the energy-company-created energy shortage back then.

So, in summary, again, this is about regular people having to pay sales taxes that rich people don't have to. And it is about Republicans being confident that the public isn't going to find out.

Click to continue.

Posted by Dave Johnson at February 19, 2008 3:20 PM

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