Luxury Tax?

Question

What are some pro's and con's of raising the luxury tax on items over $50,000. Im writing a speech on it and i need some help brainstorming. Any ideas on websites i should go to would help as well
Thanks!

Answer 1

The luxury tax is officially dead and has been for several years. The primary reason it was killed off was a classic case of The Law of Unintended Consequences.

Although it was pretty easy to collect the tax on automobiles since their sales are tightly regulated most other goods are not so tightly controlled. Wealthy people would buy their yachts and expensive jewelry outside the US and avoid the tax entirely. Dealers in expensive goods took a massive hit and a number of them were bankrupted.

Answer 2

The excise tax on luxury automobiles went out of effect for sales after 2002. It was a tax of 10% of the price of the automobile over $30,000 as adjusted for inflation. See section 4001 of the Internal Revenue Code. Tax policy issues on a tax like that would likely center on the values relected in imposing such a tax. Why impose an excise tax, in addition to the general federal and maybe state income tax and maybe state sales tax? Is it that only rich people can afford the items that are subject to the tax, so it's ok. What is the amount of tax raised by the luxury tax? Does it warrant the costs of administration? I guess the question is who decides what items should be subject to a luxury excise tax? Cars under $30,000 are good, cars over $30,000 are needless luxuries? That is what the statute in effect was saying. The statute made an exception for electric cars. What about hybrids? Is a Prius better than a hybrid Lexus? Why is that something that Congress should be deciding?