January 8, 2008
The Luxury of Harming Citizens
There could hardly be a better symbol for the errors — becoming ever more detrimental to the people of Rhode Island — in mindset of the General Assembly than Senator Dan Issa's perennial bill to tax expensive clothing:
At some point, though, he said, "expensive clothing goes beyond being about filling a basic human need and becomes a luxury and I believe that luxury items, including luxury clothing items, should not be exempt from our state sales tax."This year, with the state facing a $450 million budget hole, may be the year the legislature passes a bill Senator Issa has introduced yearly for at least the last decade — a bill to impose a luxury tax on expensive clothing.
"I don't mean to suggest that these aren't important items, to some people," said Senator Issa. "I just don't think it is right for someone to drop $10,000 on a fur coat and be exempt from taxes on that item when there are people in our society who are scraping to put clothes on their kids' backs and pay their heating bills at the same time." ...
Senator Issa said he believes enactment of his bill could generate as much as $1 million annually in sales tax revenue and correct what he thinks is a fairness issue — one that allows shoppers from nearby states to avoid their state's luxury tax by shopping in Rhode Island.
"Most importantly, a million dollars is a figure that would have a significant impact on helping those in our state most in need."
As it happens, this year, I face the prospect of scraping to put clothes on my kids' backs, and as far as I'm concerned, the state of Rhode Island ought to engage in even more "unfair" practices that draw shoppers from neighboring states to our stores. Asserts the Senator, "this luxury clothing tax will not have a negative impact on the majority of Rhode Island citizens." We could quibble about the "majority" term, but on the general implication, Issa is wrong.
The citizens selling "$600 pair[s] of shoes" and "$1,000 Armani suit[s]" will lose sales to stores in buyers' home states — even sales to local well-to-dos, who will have a new reason to buy their luxury clothes in Massachusetts or Connecticut (not to mention New Hampshire). In turn, citizens who provide any goods or services to those who profit from luxury sales will lose their cup-fulls of the trickle.
It is becoming a dire necessity for Rhode Island's "leaders" to learn that not everything that has an effect on citizens' lives — every boon and every bane — follows from their relationship with the government. Indeed, on the whole, the government of the state of Rhode Island is their number 1 affliction.
As is typical of these do-gooders, they have no clue what they are talking about. I would guess that the income tax we gain due to no sales tax, far outweighs any "loss" in revenue, from having this sales tax.
Let's use Issa's example of the $10,000 fur coat. Undoubtedly, the furrier has a big profit margin built in, probably 30-40%, maybe more. Let's say he now has a $3,000 profit, that he will pay taxes on. Also, the one buying the coat, is saving $700, ample incentive to take a little trip to Rhody for the day.
If Issa thinks that removing the $700 incentive will still have the buyer coming to Rhody, he is nuts. So, if you have the tax, not only do you get no revenue from that, you also don't get any revenue from the profit of the furrier - there is none.
Like a drunk blowhard in a bar, without a dime in his pocket, telling the bartender to "buy everyone a drink on me", Issa is only concerned about what sounds good, with the consequences of his stupidity to be dealt with by the rest of us. Typical slimy politician trolling for votes. Isn't that why we are in such a jam?
Taxes that only someone else has to pay always sound really nice on the surface.
You would have thought they'd learned something from the "luxury tax" on yachts built in Rhode Island that was imposed back in the 1990s ... you know those big boats that only "the rich" have. Surprise, surprise, they ended up buying their boats elsewhere, and darn near killed off our entire local boating industry. It wasn't "the rich" that lost their jobs, was it?
Fortunately the General Assembly eventually saw the error of their ways and repealed it, but not before doing a lot of harm to middle class folks who made their living building and maintaining those yachts.
PS Tip for you all ... rich people don't get rich by wasting money they don't need to. If people have the means, and can shop somewhere else and get the same thing at a better price, unless they're self-loathing, they do and they will. It's called the Law of Supply and Demand.
Posted by: Will at January 8, 2008 7:31 PMYou guys, you're barking up the wrong tree. Revenue is fine. It's the expenditure columns you need to look at.
Posted by: Monique at January 8, 2008 8:37 PM