Friday, May 7, 2010

Taxing luxury yachts

The lawmakers in Florida have considered cutting the 6 percent boat registration tax. Florida already has one of the highest sales taxes in the US. Buying a $1 million boat will cost you $60.000 in sales tax. In nearby states such as North Carolina, yacht registration costs you $1.500 at most, whereas only $600 in Rhode Island and $500 in South Carolina. Even more attractive are Cayman Islands where you pay close to zero tax on yacht registration. Because of Florida's uncompatitive tax regime, 8 out of 10 boats in the state are registraed somewhere else, either in other costal states or abroad. The message is clear, raising taxes is tempting but in reality it leads either to tax evasion or capital escape. Higher tax rate lead to the opposite results of what the policymakers expected. Their decision costs Florida $120 million in lost revenue.

This is a clear evidence that higher tax rate does not lead to more revenue, as people and businesses easily move to more favorable tax destinations. To keep the citizens and businesses at home, you should build a more attractive business environment with lower tax rates and friendlier regulations (link).

8 comments:

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