I HAVE RECEIVED an enlightening lecture in basic economics from Dan Rostenkowski, chairman of the House Ways and Means Committee, which creates our tax laws.
He appears to have been unhappy with a column I wrote about thousands of workers in the boat industry who have lost jobs because, the industry says, a luxury tax on big boats has squelched sales.
Beginning with a neat jab of sarcasm, Rostenkowski wrote:
"I was somewhat surprised to see that you've expanded your constituency and are now representing Carl Chardonnay with the same enthusiasm you've shown for Joe Sixpack."
(Chardonnay: fancy wine and rich folks. Sixpack: plain beer and regular folks. I get it, congressman.)
"Your assault on the luxury boat tax raises some pertinent questions, but ultimately misses the mark.
"Let's begin with the basics: Increasing the tax on any item generally raises its price and, to some extent, depresses sales. This is true of the taxes on cigarettes, alcohol, gasoline and airline tickets. In some cases -- cigarettes and gasoline come to mind -- the increase in tax is often done for the express purpose of discouraging consumption.
"Contrary to what you say, Congress was aware that boats are built by people. Tobacco is grown by people. Beer is brewed by FTC people. Luxury cars are made by people. As you may recall, there was a broad bipartisan belief that revenues had to be raised as a way of cutting the deficit, which is also caused by people. There was concern that the rich pay their fair share. That is why Congress, with the President's full support, increased the tax on big boats, luxury cars and expensive jewelry.
"Meanwhile, the economy isn't doing very well. Sales of luxury cars are down. That may partly reflect the luxury tax. It may also reflect dealers' efforts to boost sales at the end of last year immediately before the tax became effective. But sales of cars below the tax threshold are also down. I assume this is also the case with boats. Otherwise, we'd be hearing about the boom in boat sales in the $95,000 price range.
"That's the way the world works unless you want to accept the logic of supply-side economics. If you do, then you probably believe that we should cut all taxes at all levels. Of course, the government wouldn't have any money. In that case our roads and schools would get worse. The environment would get dirtier. America would do even less than it now does to help our unfortunate citizens who are unable to help themselves.
"You worry about Congress. That's your right. Maybe even your responsibility.
"I worry about a guy who allegedly represents the common man who thinks that a tax on luxury boats is a mistake. Maybe you've been spending too much time in sailboats and not enough in rowboats. Try to stay out of the sun."
Actually, I never ride in sailboats. They make me nervous. Nor do I jet around the country, playing in celebrity golf tournaments, as a noted congressman does. But that's another story.
However, I do see Rostenkowski's point. The rich should pay their fair share. So if some factory owner can afford a $300,000 boat, why not tag on a $20,000 tax? Would a high roller notice a piddling $20,000?
Unfortunately, the boat industry says, yes, the high roller does notice. And many haven't bought. So combined with the recession, the luxury boat industry has been devastated. They estimate that as many as 20,000 jobs have been lost, and many boat yards have shut down.
As one former boat builder told me: "I made it through recessions in the past. But the tax on top of the recession put me under."
So the taxes aren't being collected because the boats aren't being sold. And the boats aren't being built, so boat workers are jobless. And without jobs, they lack income, so they aren't paying taxes.
I'm not sure how that will buy us better schools, environment and highways, and help our unfortunate citizens, but I'm sure Rostenkowski will figure something out.
Maybe one solution would be to put a 10 percent tax on the sale of all new homes that might be considered in the luxury class. Depending on the part of the country, let's say a luxury home might cost $500,000. Does anybody really need a $500,000 house? How many johns does it take to relieve oneself?
Of course, such a tax could depress home sales. Which would put carpenters, plumbers, plasterers, and others out of work. But I'm sure they wouldn't object, since they would be losing their jobs for the noble purpose of making the rich pay their fair share of taxes, even if the taxes weren't being paid. It's the spirit of the thing that counts.
Anyway, I appreciate Rostenkowski's lecture, and his suggestion that I stay out of the sun. As we all know, too much sunlight isn't good for the skin, although I suspect that he is implying that the rays have scrambled my brain, which may be true.
So I'll reciprocate by urging Rostenkowski to stay out of the sun, too, although that might be difficult, unless they start playing all those golf tournaments at night.