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Boat: a hole in the ocean in which to pour money

July 29, 2010

So John Kerry is going to pay use $500,000 in Massachussetts tax on the boat he moored in Rhode Island to avoid paying $500,000 in Massachussetts use tax. While it's normal and healthy to mock politicians in almost all circumstances, I like this thoughful take:

No one is ever likely to mistake me for the president of the John F. Kerry Fan Club. I worked hard to prevent Kerry's election to the Senate in 1984, I have voted faithfully for his opponents ever since, and when he ran for president in 2004 I was impolite enough to describe him as a "tedious blister."

But I didn't join in the big horselaugh that everyone had at Kerry's expense after learning that he had avoided nearly half a million dollars in Massachusetts sales and excise taxes by keeping his new yacht tied up in Rhode Island. And I'm not gloating over his decision yesterday to put a stop to the media feeding frenzy by voluntarily sending the Department of Revenue a check for $500,000, "whether owed or not."

...

What was the point of browbeating Kerry into paying higher taxes? Or rubbing his nose in his own history of laments about "tax-cuts-for-the-rich" and how "abusing offshore tax loopholes is wrong"? It would have been far better to seize the moment to make Kerry see that by arranging to enjoy his yacht without paying the Bay State's onerous taxes, he was acting not badly or selfishly, but rationally. Maybe Kerry could finally have absorbed the fundamental economic reality that human beings respond to incentives -- and when taxes are too high, taxpayers and their money have an incentive to go elsewhere. Even fabulously rich taxpayers like Kerry and his wife.

(Hat tip: TaxProf)

I don't know many taxpayers who would pass up a $500,000 tax savings. If a politician uses a legal tax break, it at least shows some understanding of the tax law; they have to start somewhere. It doesn't make sense to make somebody compute taxes in a way other than what the tax law prescribes. Where would you stop?

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