Uwe Reinhardt: 1990 tax imposed on luxury boats a glaring example of deadweight loss

See Nope, Government Health Insurance Isn't Costlier Due To The Deadweight Loss Of Taxation. Mr. Reinhardt is the James Madison Professor of Political Economy at the Woodrow Wilson School at Princeton University.

Here is the exact quote:

"A glaring example of the deadweight loss of a tax was a 10% tax imposed on luxury boats costing more than $100,000 imposed in 1990."

He had a link to a 1992 NY Times article Falling Tax Would Lift All Yachts. It does mention that other things hurt the industry, but it implies that the tax hurt as well. Excerpts:

"The nation's luxury-boat builders, many clinging to their businesses after two years of plunging sales, finally got some good news last week.

President Bush, in his budget proposals, asked Congress to repeal the 10 percent luxury tax on yachts priced at more than $100,000 (and also on private planes that cost more than $250,000). The repeal, which Congress is likely to approve, would be retroactive to Feb. 1.

Since the tax took effect in January 1990, hundreds of builders of large and small boats have spoken of it as a stake driven into the heart of an industry already suffering from the recession, tighter bank rules on financing and fallout from the gulf war.

In the last two years, about 100 builders of luxury boats -- recreational craft costing more than $100,000 -- cut their operations severely and laid off thousands of workers. Some builders filed for protection from creditors under Chapter 11 of the Federal Bankruptcy Code.

Now, sales personnel and owners of marine companies are hoping they will be swamped by buyers who have held off in the expectation that the tax will be repealed.

The 10 percent tax applies to the amount of the cost above $100,000, so that a boat selling for $300,000 carries a $20,000 luxury tax. That tax is in addition to any state and local taxes.

Mr. Bush's proposals were endorsed by Senator George J. Mitchell, Democrat of Maine and majority leader, whose state is active in boat building. That increases the chances that Congress will accept the argument that repealing the tax will create jobs and promote economic growth. Overall employment in the industry, including the makers of smaller, less-expensive boats, has dropped to 400,000, from 600,000 in 1988.

Adding to the industry's optimism are signs of a small revival in boat sales. Most companies said they sold more boats at the New York National Boat Show earlier last month than at last year's show, when sales were very weak. They said the boat show also had good attendance during its run at the Jacob K. Javits Convention Center in Manhattan.

Also, boat prices have dropped as much as 40 to 50 percent, interest rates have fallen and some lenders have begun to offer financing, though on very strict terms.

In 1991, sales of luxury boats dropped 70 percent from 1990's level, while overall boat sales fell 18 percent.

"The luxury tax really hurt us," said William J. Healey, the president of the Viking Yatch Company in New Gretna, N.J."