Bill Limiting Sales Tax on Expensive Boats Still in Dry Dock on Christie’s Desk

Cap of $20,000 is billed as way to help New Jersey’s boating and marina industry compete with neighboring states

Gov. Chris Christie in recent days has rejected a host of budget-related bills sent to him by Democrats who control the state Legislature, including measures that would have hiked the state’s corporate-tax rate and boosted funding for family planning clinics.

But another Democrat-sponsored bill still sitting on Christie’s desk may get a longer look.

Lawmakers last week sent Christie legislation that would set a $20,000 cap on the sales and use tax on yachts and other expensive noncommercial boats purchased in New Jersey.

The bill won bipartisan support in the Legislature and offers Christie — a Republican who is now officially a candidate in the tight 2016 GOP presidential race — a chance to adopt a new tax break in a state that’s well-known for its high taxes.

But it also poses a dilemma for Christie because he’s chided Democrats in the past for sending him bills that would cost the state money without identifying cuts to offset those losses – exactly what the yacht-tax cap bill would do if enacted.

The bill’s sponsors, however, believe the yacht-tax cap would ultimately increase state revenue by putting New Jersey’s boating and marina industry on equal footing with counterparts in states like Florida and New York where the sales tax on boat purchases has already been capped. Neighboring states like Delaware, Maryland and Pennsylvania also have more favorable tax policies, they say.

“Our current sales and use tax is driving residents and companies to buy and dock their boats in other states where they can save tens of thousands of dollars,” said Sen. Jim Whelan (D-Atlantic). Right now, New Jersey levies a 7 percent sales tax on noncommercial boats purchased here, and there is no cap on the amount of taxes that can be paid on a single boat purchase. The bill now on Christie’s desk would limit sales taxes to no more than $20,000 even on yachts worth millions of dollars.

The tax break would only be about $1,000 for those buying boats worth $300,000, but would jump to approximately $22,000 for someone buying a boat worth twice as much. And the buyer of a yacht worth $1 million would get a $50,000 tax break, according to New Jersey Policy Perspective, a liberal think tank based in Trenton that has opposed the legislation.

Gordon MacInnnes, the organization’s president, called the yacht-tax cap “another tax break for the wealthy” that “won’t help average people or the state’s economy.”

But the sponsors note that in Florida, the sales-tax cap on boat purchases is lower, at $18,000. In New York, new tax incentives are being offered to anyone buying a boat worth more than $230,000 under the budget Gov. Andrew Cuomo signed into law earlier this year.

“New Jersey’s boating industry is losing business because other states simply have better deals for our consumers,” said state Sen. Jeff Van Drew (D-Cape May).

Though Christie took immediate action on some of the other budget-related bills sent to him last week, he now has well over a month to consider several others, including the yacht-tax cap legislation.

And though it may seem like a sure thing that Christie would adopt the tax cap, given that it gives him a chance to cut taxes in the spotlight of his presidential run, that may not be the case.

Christie in the past has rejected tax-credit legislation proposed outside of the state budget process. For example, in 2011 Christie rejected legislation sponsored by Democrats that included tax credits aimed at jumpstarting the state’s struggling economy.

One of the reasons Christie cited was the Democrats’ failure to identify “any corresponding reductions in the state’s budget” to offset the proposed credits.

“It is too easy for the Legislature to send bills to my desk which ignore the overall fiscal impact of their spending proposals,” he wrote in the veto message. “This is the old way of Trenton politics, which always ends with the taxpayers footing the bill and has created the fiscal crisis we have spent the last year beginning to turn around.”

In his rejection earlier this week of legislation that would have provided an extra $7.4 million in funding for family planning clinics, Christie criticized the sponsors for proposing “unbudgeted spending for selected interests.”

It’s unclear how much the yacht-tax cap would cost the $33.8 billion state budget Christie just enacted for the fiscal year that began yesterday. A fiscal estimate of revenue that would be lost to the proposed cap was not prepared by legislative staff this year.

Brian Murray, a spokesman for Christie, declined comment on the legislation yesterday, saying it is still under review.

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