Rich Don’t Want Any More Taxes on Their Toys

Down along Mariners Mile in Newport Beach, where opulence is as common as leather seats in a Mercedes-Benz, the wealthy and those who serve them yelped in pain Monday over a proposed luxury tax on yachts, jewels, cars and other accoutrements of the good life.

Jim McLaren, owner of Orange Coast Yachts in Newport Beach, was dour. “If the government is going to take 10%, there’s 10% less to buy boats,” he said, adding that a worsening economy had already hurt boat sales.

Another manager of a yacht brokerage, who spent the morning trying to sell a $13-million, 145-foot yacht, moaned that Congress was penalizing his industry “because people perceive it as a rich man’s pursuit, which it is not.”

The reactions came a day after President Bush and congressional leaders agreed on a package of tax increases and spending cuts aimed at reducing the federal budget deficit by $40 billion in the fiscal year that began Monday, and by a total of $500 billion over the next five years.

Among the proposals are a luxury tax of 10% on the portion of the retail price in excess of $30,000 for cars, $5,000 for furs and jewelry and $100,000 for private airplanes, boats and yachts.

For instance, on a $35,000 automobile, the buyer would be charged an additional 10% on $5,000, or $500. A $7,500 diamond ring would cost another $250.

Yachtsmen, furriers, jewelers and luxury auto dealers interviewed Monday all held out hope that the big-ticket tax, slated to take effect next year, will be voted down by the full Congress.

And members of trade associations with Washington lobbyists promised to oppose the measure strongly.

John Malley, owner and president of Dana Harbor Yacht Sales in Dana Point, said the tax is likely to hit harder at sales of lower-priced boats than at million-dollar yachts.

“I think there are people that may be stretching to get into the $150,000 to $200,000 range,” Malley said. “They’re not wealthy people in the sense of being millionaires, but they still want to buy a boat. They may be compromising another facet of their life to make that happen. It may make people change their minds and not do it.”

Malley said that 25% of his company’s sales are in the over-$100,000 range. “I’ve been doing this for 14 years and I have clients that graduate every few years. Maybe they bought a $30,000 boat and then an $80,000 boat and their next step is $100,000.”

At Newport Imports Inc., a Coast Highway auto dealership that sells Ferraris, Aston Martins and a lovely cherry-colored Jaguar limousine with a compact disk player and fax machine in the back--all included in the $112,000 sticker price--owner Lee West called the proposal from Capitol Hill “an undue tax on successful people.”

Yet West figured that it might not hurt sales too badly.

“If people want to spend the money to buy a luxury car and they like the product that we’re selling, they’re going to buy it.”

On the other hand, the Mercedes-Benz sales manager at a San Fernando Valley auto dealership said several of his customers expressed concern Monday about the proposed luxury tax. The sales manager, Richard Spears of Jim Bess Calabasas Inc., said one customer agreed to buy a Mercedes only if the car comes in and the sale is completed before the luxury tax takes effect.

Spears said a luxury levy, coming on top of the existing gas-guzzler tax on his cars, would hurt sales. “It gets to a point where people say enough is enough,” Spears said. The Newport Beach broker selling the $13-million yacht looked for the silver lining.

“When you get to like boats, it’s something in your blood,” he said. “You’re not going to not do it because of a 10% tax.”

For a $13-million yacht, the tax would work out to $1.29 million.

In New York, the chairman of Jewelers of America Inc., Michael D. Roman, said his industry has been suffering for the past 2 1/2 years and that the new tax could be the death knell for small stores and some large chain stores alike.

“Our product doesn’t create any health hazards, doesn’t destroy the environment,” said Roman, who put the membership of his group at 13,000, representing about 20,000 stores nationwide. Jewelry just “makes people happy,” he said.

Roman asked why the tax was limited to jewelry, planes, yachts, cars and furs. “What’s a luxury? Is an $80,000 painting auctioned at Sotheby’s a luxury? A cruise? If you’re going to talk luxury, make it luxury. But don’t discriminate against our business.”

Times staff writer James S. Granelli contributed to this report.