Growls

According to James Gwartney in the Concise Encyclopedia of Economics, 'supply side economics' "is “also used to describe how changes in marginal tax rates influence economic activity. Supply-side economists believe that high marginal tax rates strongly discourage income, output, and the efficiency of resource use. In recent years, this latter use of the term has become the more common of the two and is thus the focus of this article.”

Yesterday, the Boston Herald reported that Sen. John Kerry (D-Massachusetts) “has repeatedly voted to raise taxes while in Congress.” The newspaper went on to report that Kerry:

“ . . . dodged a whopping six-figure state tax bill on his new multimillion-dollar yacht by mooring her in Newport, R.I.

“Isabel - Kerry’s luxe, 76-foot New Zealand-built Friendship sloop with an Edwardian-style, glossy varnished teak interior, two VIP main cabins and a pilothouse fitted with a wet bar and cold wine storage - was designed by Rhode Island boat designer Ted Fontaine.

“But instead of berthing the vessel in Nantucket, where the senator summers with the missus, Teresa Heinz, Isabel’s hailing port is listed as “Newport” on her stern.

“Could the reason be that the Ocean State repealed its Boat Sales and Use Tax back in 1993, making the tiny state to the south a haven - like the Cayman Islands, Bermuda and Nassau - for tax-skirting luxury yacht owners?

“Cash-strapped Massachusetts still collects a 6.25 percent sales tax and an annual excise tax on yachts. Sources say Isabel sold for something in the neighborhood of $7 million, meaning Kerry saved approximately $437,500 in sales tax and an annual excise tax of about $70,000.

“The senior senator’s chief of staff David Wade denied the old salt was berthing his boat out of state to avoid ponying up to the commonwealth.”

Is Senator Kerry a hypocrite or tax dodger for acting to avoid high marginal tax rates, or has he now become a “supply sider” and will now be voting for lower federal tax rates? As Fox News likes to say, “We report, you decide.”

There is an alternative, and probably more serious. view in all of this, however. Gregg Collins at Examiner.com writes:

“The more important issue is that time and time again, legislation passed with certain intentions creates incentives for people to act in ways they wouldn’t behave (pseudo-intellectuals like to call this “unintended consequences). Fewer people would not open offshore accounts in Switzerland and other European countries if the American tax code was less draconian. Fewer employers would be less willing to hire new workers if the business climate was more stable and adaptable to changing economic circumstances. Kerry would have been less likely to berth the yacht in a neighboring state with lower or no taxes on that particular action if the same tax regulations applied to Massachusetts.

“In essence, Kerry may be yet another tax dodger, and he may be duplicitous for supporting excessive tax regulations in Congress while seeking out loopholes for himself.” Another view, as NECN reported a Republican spokesperson saying in closing the story, it proves Massachusetts taxes are too high.

“But in this particular instance, don’t blame him.

“Blame the Massachusetts legislature.”

An additional view, as NECN reported in the video accompanying the LA Time story, a Republican spokesperson says in closing the story, it proves Massachusetts taxes are too high. By the way, the Los Angeles Times has a great picture of the $7 million yacht named Isabel.