Newspaper article THE JOURNAL RECORD

Committee Votes to Kill Luxury Tax

Newspaper article THE JOURNAL RECORD

Committee Votes to Kill Luxury Tax

Article excerpt

WASHINGTON (AP) _ The Senate Finance Committee voted Tuesday to kill the luxury tax on expensive yachts, planes, furs and jewels, and to extend for another 18 months a dozen special tax breaks.

Renewal of the targeted tax reductions would be financed by selected tax increases on corporations. Those allowed to take advantage of the breaks include the selfployed, workers who receive education assistance from their employers and investors in lowcome housing.

The panel agreed to retain the luxury tax on highice cars and said owners of dieselwered recreational boats should foot most of the bill for wiping out the other taxes. Although exempt now, they would have to pay the 20.1-cent-agallon tax on diesel.

"This luxury tax has been a total disaster in every respect," Sen. John Chafee, R-R.I., said in urging repeal.

The tax has been under attack since it was enacted in 1990 as a way to get more money from uppercome Americans without raising incomex rates. Opponents say the soakech idea backfired by cutting demand for luxury items, resulting in a loss of many lownd middlecome jobs.

The luxury tax had been predicted to raise $25 million in 1991 _ it actually brought in $98.4 million _ and $1.5 billion over five years. Nearly 90 percent of the money has come from sales of cars costing over $30,000.

Under the committee's bill, the tax on cars would remain, but the $30,000 threshold would be raised each year to adjust for inflation.

The remainder of the 10 percent tax would be wiped out retroactively to Jan. 1. It applies to the portion of the sales price above $250,000 for private planes, $100,000 for yachts, and $10,000 for jewels and furs.

Repeal of most of the luxury tax and extension of the targeted tax cuts were included in a bill that Congress passed in March. It was vetoed by President Bush because it would have raised income taxes for the richest 1 percent of taxpayers. …

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