Not only did the luxury tax cost jobs, it lost revenue on balance.
Back in the hot summer of 1990, Senate Majority Leader George Mitchell proudly engineered the infamous "luxury tax," a nasty little tithe on everything from furs to jewelry to yachts. Democrats were proud: Not only were they throwing new dollars at the Treasury, they'd done it by socking it to the rich. The wealthy, in the words of then-House Majority Leader Dick Gephardt, would finally pay "their fair share."
Within a year, Mr. Mitchell was back in the Senate passionately demanding an end to the same dreaded luxury tax. The levy had devastated his home state of Maine's boat-building business, throwing yard workers, managers and salesmen out of jobs. The luxury tax was repealed by 1993, though by the look of today's tax debate, its lessons haven't been forgotten. Top Democrats are working to implement a new class-warfare tax strategy, only this time they're getting pushback from those in their party who fear the economic consequences.Tax hikes are flying out of House and Senate committees, though what they all share in common is that each is laser-targeted on some rich or disreputable industry. The carried-interest tax would soak greedy hedge-fund managers. The "Blackstone tax" would hit wealthy private equity partnerships. A new farm-bill tax would siphon dollars from the U.S. subsidiaries of big foreign corporations. A repeal of a domestic deduction would suck money out of dirty oil companies. The tobacco tax needs no explanation.
And, they hope and pray, it allows them to raise money while avoiding the tax-and-spend moniker. After all, they aren't giving America tax hikes, they're giving America "tax justice." If you see what they mean.
This isn't to suggest some of these bad taxes won't go through; they will. But it's encouraging to know that, even amid this latest round of Democratic class-warfarism, the party harbors a minority who understands that taxes do have economic consequences. You can almost hear the ghost of the luxury tax past rasping away in the background.
- The lost jobs cost $24.2 million in unemployment benefits plus income tax revenue the government didn't get, so taking into account the $16.6 million collected, the net effect of the taxes was a loss of $7.6 million in fiscal 1991.