How the concentration of wealth gets spent
Title: Lapping up luxury
Source: Knight Ridder
Date: March 27, 2004
It may be the case, as reported in the previous post, that 40 million individuals in the U.S. have no health insurance, 35 million are living below the poverty line and hunger in America's large underclass is causing Americans as a population to shrink. Nonetheless, the other side of the concentration of wealth means that there are quite a few rich people. The article offers a perspective on their spending habits today. For example:
- "High-end retail sales are surging as the rich take advantage of tax breaks and — for them — good economic times."
- "If you sell to the wealthy, the economy is booming. Jobs may be going overseas and consumer confidence may be running low, but as the presidential campaign heats up debate on the economy, one thing is certain: It's good to be rich."
- "Nationally, new boat sales were up 9.5 percent in 2003... 'These people don't even know there's a recession,' said Chan Moser, a yacht broker in Stamford, Conn. 'The interest rates are low. They don't give a damn. You should see what's being built.'"
- "At the Hinckley Co., whose Maine-made semi-custom boats range from 29 to 70 feet and cost from $300,000 to $5 million, the order backlog is bigger than it's been in years."
- "There's a lot more after-tax income for higher-income households."
- "Recent ads in The Wall Street Journal trumpet the advantages of partial private-jet ownership. Costs start at $4,600 a month for one-sixteenth of a jet, plus a $1,760 hourly flight rate and $6,485 in monthly management fees."
- "Buy a million-dollar yacht with a bank loan and you can deduct the interest you pay on the mortgage — just like you can on your house."
- "Buy a share of a private airplane and get accelerated depreciation on the expense. Plus, you get to expense the hourly cost of the plane if you use it for business."
- "Tax breaks are also available to small-business owners of cars that weigh more than 6,000 pounds. So if you have your own business and can afford a Hummer H2 or a Cadillac Escalade, both of which have base prices of more than $50,000, you can write off thousands of dollars from the cost more quickly than on any other type of car. A 2003 tax-code change allows small-business owners to deduct the cost of a vehicle weighing 6,000 pounds or more in gross vehicle weight. It can be fully depreciated in the first year, up to $100,000."
- "Democrats say the luxury boom signals that the tax code contains special breaks that widen the gap between the rich and everybody else."
The article Robotic Freedom discusses the concept of a central account that disperses money equally to all American citizens, and suggests a number of examples for sources of funding. Example #13 is luxury taxes. Lapping up luxury points out why such taxes are now appropriate.