Congressman Quigley to Some Boat Owners: Shove Off

This week, U.S. Representative Mike Quigley (D-5th) is releasing a list of 60 ideas to reduce the federal debt and deficit spending—and already, one of the smallest proposals in the pack has stirred up angry opposition. Quigley advocates ending the home mortgage interest deduction for boats that owners have claimed as second homes…

U.S. Representative Mike Quigley

This week, U.S. Representative Mike Quigley (D-5th) is releasing a list of 60 ideas to reduce the federal debt and deficit spending—and already, one of the smallest proposals in the pack has stirred up angry opposition. Quigley advocates ending the home mortgage interest deduction for boats that owners have claimed as second homes. “A boat is not an essential item for a typical family—like a house or a car,” Quigley told me Monday. “When we’re looking at massive cuts in the Department of Defense and education, we can’t afford to be giving these folks a government subsidy for buying a boat.” (While not technically a subsidy, allowing boat owners to write off mortgage interest pre-tax is tantamount to a tax give-back by the government.)

Although Quigley opposes efforts to eliminate the mortgage interest deduction for a homeowner’s primary residence, he was unequivocal about eliminating it for boat owners. “What this [proposal] does is say you’re not going to get a government incentive to buy a boat,” he said. As proposed, the new rule would not apply to people who owned boats before the law goes into effect (if it does). As the law stands now, boat owners can claim the mortgage interest deduction for a vessel that has cooking, sleeping, and toilet facilities.

On May 3rd, Quigley and two Congressional colleagues issued a press release announcing the Ending Taxpayer Subsidies for Yachts Act. The next day, I heard from Kurt Fujio, a Coldwell Banker agent and real-estate attorney who runs the blog Sail Fast Chicago. Although Fujio doesn’t own a boat, he called the proposal a “job killer” because it would effectively increase the cost of buying and owning a boat. He added that the City of Chicago, which operates north America’s largest municipal harbor system, estimates that boat owners here spend $69 million a year on their vessels. “Do you want to cut that off?” he asked.

Lou Sandoval, a co-owner of Karma Yacht Sales at 36th and Halsted, blogged last week that the rule would hamper a comeback in yacht sales. On Tuesday, Sandoval told me that Quigley’s bill wouldn’t impact the super-rich. The proposed change, he said, “is going to fall on what is considered a middle-class or average boater, who spends $200,000 on a boat and can only afford to do that because of what the deduction offsets.” (He also noted that people with $1 million or more in mortgage debt cannot take the boat deduction.)

Fujio and Sandoval both accused Quigley of “class warfare,” picking on yacht owners as privileged fat cats. But Quigley countered that “everyone is going to have to share the pain, including boat owners.” Congressional staff say that, because the IRS does not separate boat deduction claims from all second-home claims, there is no way of knowing how much money is at stake. One staffer sent me a six-year-old Seattle newspaper article that put the amount at about $1 billion.

Rather than worrying about the exact dollar figure, Quigley said he is focusing on “everything we can do to reduce the debt and deficit. We’re in a crisis situation. If we can’t get this [boat rule] changed, how are we going to do the hard choices?”

 

Photograph: Chicago Tribune

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3 years ago
Posted by Against Class Warfare

If you want to eliminate the interest deduction on all second homes, go for it.

This legislation is apparently based on the premise that “yachts” are owned by rich people and that the American taxpayer is subsidizing their extravagant lifestyle. This is a great misunderstanding. A “yacht,” by definition, is any vessel that is 26 feet or longer and the deduction on interest expense is only applicable if the boat has a head, galley, and sleeping berth. We know that a 26-footer is hardly what we all think of when we hear the word “yacht.” Many a boat that can function as a second home on a lake or river fits the definition of “yacht.” If land-sited dwellings and RVs can qualify for a mortgage deduction as a second home—and they can—why should a live-aboard boat be excluded simply because it floats on the water instead of being placed on land or driven down the highway? The logic is simply not there.

This change will fall predominantly on middle class Americans who spend their weekends aboard their boat with their families and on the middle class workers who build and service those boats.

3 years ago
Posted by Middle Class Chicago Boater

This is so misguided. "everyone is going to have to pay, including boat owners." Congressman Quigley's idea sounds good -- make the rich pay more, but the reality is most boaters (about 75% according to what I found online) are middle-class, making under $100K per HOUSEHOLD. So, yet again, the middle-class is being targeted unfairly.

It's almost a certainty that the individuals that this legislation targets—the owners of "yachts" — do not use this deduction. Those who are rich enough to afford the million-dollar boats the legislation's authors probably meant to target undoubtedly already have second homes on which they take the mortgage deduction. Instead, this bill would target the middle income family that decides to have their second home float on the water, instead of purchasing a stationary home or a rolling home. It all comes down to basic fairness.

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