Who Remembers the Federal Luxury Tax?

[MineralMan]

I first encountered it in 1961 when I was 15 years old and wanted to buy my girlfriend a birthday present. I didn't have a job then, but I had a few bucks I'd saved from this and that source, so I went shopping. At one store in my small California town, I found just the thing. It was a little caged pearl pendant on a very slender little gold chain. 10k, the label read. How much? It was marked at just $15, on sale.

Looked a little like this:



When I chose it and the cashier rang it up, she added the CA sales tax, which was 4% at the time. Cool, I had what I needed. But then, she added on the luxury tax, which was 10% more. At that point, I didn't have enough to make the purchase. I asked the clerk at the store if she could put it aside for me until the next day, and she took pity on a skinny teenager and said sure. I was about 50 cents short.

So, I took a walk around the backs of the stores, looking in their dumpsters, and walked through the park, checking trash cans. It wasn't long before I found enough pop bottles so that I could turn them into the local grocery store and claim 50 cents in deposit paybacks for the bottles.

I went back to the store, gave the clerk the right amount, and she deftly wrapped the little necklace in its box with some colorful paper. I gave it to my girlfriend the next day and she was pleased. Life was good.

We don't have luxury taxes any more. At 15, I didn't question that tax. That $15 10k pearl necklace was, indeed, a luxury for a 15 year old boy. I don't remember being pissed off that I had to pay it. I found the means to do so pretty quickly anyhow. Should we re-institute a federal luxury tax on luxury items? I don't know. Maybe there should be a base price below which no tax would be assessed, making it easier for people like I was to buy their high school girlfriend a nice present. But, maybe not. Maybe it was OK for me to pay an extra 10% to make a pretty girl happy. I don't know.

[frazzled]

1. How could that have been considered a "luxury"?

True, a $15 item in 1961 would cost $117.31 in today's dollars. But still ... as far as jewelry goes, it's not exactly Cartier's.

I don't remember such a luxury tax (was it only in California?). There was a luxury tax passed at the federal level in 1991, but a piece of jewelry would have to have been over $10,000 to qualify. The tax was rescinded only two years later:

In November 1991, The United States Congress enacted a luxury tax and was signed by the former President George H.W. Bush. The goal of the tax was to generate additional revenues to reduce the federal budget deficit. This tax was levied on material goods such as watches, expensive furs, boats, yachts, private jet planes, jewelry and expensive cars. Congress enacted a 10 percent luxury surcharge tax on boats over $100,000, cars over $30,000, aircraft over $250,000, and furs and jewelry over $10,000. The fedral government estimated that it would raise $9 billion in excess revenues over the following five-year period. However, only two years after its imposition, in August 1993, the Congress decided to eliminate the “luxury tax” since it did not achieve its main objective. The tax revenues generated were disappointing and unsatisfactory for the Congress and it also negatively impacted the incomes of the sellers of the luxury items. Although the luxury automobiles tax was still active for the next 13 years.

http://en.wikipedia.org/wiki/Luxury_tax

[MineralMan]

4. Nope. It was a federal tax.

Gold jewelry was one of the things that was subject to it. The clerk at the store explained it to me when I looked disappointed. That was the first I heard of such a thing.

[SoCalDem]

31. Lots of things figured into it.

ALL jewelry was subject to it..leather handbags too.. anything with fur..perfumes..some cosmetics

This was in Kansas in the 60's

Anything that was NOT a "necessity" could fall into the luxury-tax venue.

[MineralMan]

33. Yup. That's what I remember, too.

[unblock]

2. you mean it wasn't just one of the spots on the monopoly board??

[MineralMan]

7. I guess not.

[Fawke Em]

13. My first thought, too.

Never heard of it in real life!

[MineralMan]

15. I'm really old.

LOL!

Actually, they added a luxury tax to very expensive stuff in 1991 again. That tax is gone now, though. I don't think that one applied to dime store jewelry though. In 1961, Sprouse Reitz stores had a small jewelry counter.

[bravenak]

3. Yes we need a luxury tax.

But only on luxury items that are expensive. Like private jets, let's tax those at 80 percent. Yachts at about 75 percent of cost. Incomes over 50 million a year should be taxed at 99 percent, they probably stole plenty of that anyway.

Multi million dollar homes should be taxed heavily too. Maybe 60 percent of value.

I could go on like this all year finding new things to tax. Then we can spend it on the poor!!

One of my favorite fantasies involves stealing from the rich and giving to the poor. And opening up a whole bunch of homeless shelters and treatment centers, and veterans homes/job centers, and free child care/ preschools. And feeding anyone whose hungry, rich or poor, with shops in every neighborhood.

[MineralMan]

6. I can see that as a possibility, too.

I don't know where that $1.50 went, frankly. It didn't matter to me. I got kissed. That was worth plenty at 15.

[bravenak]

8. I would have kissed you too.

Working so hard and putting all that effort in deserves a bit of reciprocity.

[MineralMan]

9. It was all worth it!

It's funny to think of those days, when we were so young and things were so simple. A 15 year old boy with a 14 year old girlfriend made for lots of smiles and a certain amount of anxiety at the same time. Great combination!

The girl's mother gave me a look, though.

[bravenak]

12. I miss those days.

Life was so easy, I didn't know how easy it was until I had kids.

I'll be just like the girls mother soon enough. I'm practicing my stink eye for the future.

[MineralMan]

14. I think all mothers of daughters

have a stink eye ready for boys that hang around their girls. And rightly so, no doubt.

[Lasher]

5. What a quaint concept.

What would today's job creators think?

[antiquie]

10. You mean "they" don't pay luxury taxes

on boats and planes and million dollar rings any longer?
I must have blocked that out.

[MineralMan]

11. Nope. That 1991 tax is gone.

[Boom Sound 416]

16. For some items it still exists

Cars is one

[MineralMan]

17. I didn't know that. I thought it was repealed.

[Boom Sound 416]

18. I'm sure about the jets

Because it nearly collapsed the industry, because folks at that level bought used. (I'm pretty sure I saw that on tee vee.)

The same went for yachts, but I think I've seen online that exotic and super cars still carry a luxury tax (you know because I'm shopping for things like that )

[MineralMan]

19. Well, I won't be buying my current girlfriend/wife any of those

things, I can tell you. Not a chance. We're scrimpers these days.

[Boom Sound 416]

20. It's hard enough just to keep them seperated

[MineralMan]

21. Yes. Even though they're the same person.

I'm never entirely sure which one I'm talking to at any given time. She does appreciate a nice gift of jewelry, though. I'm always looking for nice art deco pieces as gifts.

[hedda_foil]

28. Awww! You married her!

I love stories like that.

I hope her mom let up on you eventually.

[seveneyes]

22. No, except maybe for millionaires buying real luxury items

Not for us working stiffs. We paid our tax out of our paychecks.

[MineralMan]

23. Well, it was there in 1961. 10% on luxury goods.

Even on an inexpensive gold necklace.

[seveneyes]

24. And before that there was a poll tax

Not all taxes are good.

[JVS]

25. I prefer not to. I see the luxury tax as a kind of self-fulfilling prophecy.

Sales taxes in general have been demonstrated to be regressive. A luxury tax could just as well be described as a sales tax with many exceptions. If you want to ensure that poorer people don't get to enjoy a luxury, slap a tax on it. One of the things I like about living in the US is that even working class people can afford to drink scotch and cognac. We just need to buy the 200 ml bottle instead of the 5th.

[Nye Bevan]

26. I remember that it almost destroyed the US boat-building industry.

Millionaires can buy and register boats anywhere in the world. Trying to stick it to the rich does not always have the desired affect.

[MineralMan]

27. That was the later tax, from 1991.

As I remember, it only affected yachts. I don't remember it having anything to do with smaller boats at all.

The number of people employed by yacht-builders in the US isn't large. They were impacted, though, for sure.

[JustAnotherGen]

29. I think it's

A fair idea. My husband is used to paying it when he's at home. Not going to lie to myself or anyone else - our wedding bands came from bvlgari. At that point the tax doesn't make a difference. Jewelry to me - though something I love - is not a necessity in life. And some of the stuff I bought myself over the years? A luxury tax would not have put me off in the least.

[Scuba]

30. Now we have tax breaks for corporate jets. Kind of a luxury reverse-tax.

[tkmorris]

32. A tax of that sort chills consumption...

On everything that it applies to. I do believe we need to increase tax revenues somewhat, but doing it in this manner does not strike me as particularly wise economically.