PBS NewsHour: RISING TIDE
January 1, 1996
TRANSCRIPT
http://www.pbs.org/newshour/bb/budget/budget_1-1.html

[snip]

DAVE MacFARLANE, Alden Yachts: I don't know anybody in the Marine industry that didn't know that there was a total disaster to start, and it's still amazing to think how somebody could come up with an idea that would shut off a business, and everybody that was in the business knew this would happen, and yet it floated right through.

KWAME HOLMAN: The theory behind the luxury tax sounded simple enough. Congress believed anyone willing to spend $100,000 or more on a new boat surely would be willing to pay an additional 10 percent to the federal government. But that didn't happen. Rather than pay the tax, many people in the market to buy a boat either didn't buy one, or bought one overseas. As a result, the luxury tax didn't bring in much money at all, and the customers' reluctance to buy put the boat-building business, particularly here in Rhode Island, out of business. We first visited Rhode Island in June of 1992. The luxury tax had been in effect for 18 months. Tens of thousands of jobs had been lost across the country, thousands in Rhode Island alone.

WALTER SCHULZ, Boat Builder: (1992) When that tax came down, I mean, it was just as if, I know the metaphor sounds exaggerated, as if someone turned the faucet off.

KWAME HOLMAN: At that time we talked with Walter Schulz, founder and president of Shannon Yachts. After 17 years of building boats, his company did collapse. Schulz was forced to declare bankruptcy.

WALTER SCHULZ: American boat builders, manufacturers were able to still dominate. We were able to compete head-to-head in terms of price. We were able to compete head-to-head in terms of technology. We were able to make the technological advances that still continue to dominate. We were able to make the design advances that dominate the world market. And that existed, by the way, right up until last year, I mean, and then it vaporized.

KWAME HOLMAN: We talked with Ken Kubic, manager of the East Passage Marine on Narragansett Bay.

KEN KUBIC, East Passage Marina: (1992) We used to do close to $400,000 worth of launching and christening work for these manufacturers, and that, that just dried up to nothing.

KWAME HOLMAN: When we talked with Dave MacFarlane in 1992, Alden Yachts had no new boats on order. MacFarlane had been forced to lay off dozens of skilled workers and at the time concluded the luxury tax was costing the government more money than it was collecting.

DAVE MacFARLANE: (1992) If you look at approximately say 35 or so people laid off at about say two hundred and sixty-five to three hundred and ten dollars a week in unemployment, if you add that up, you know, it comes to about $1/2 million.

KWAME HOLMAN: Some members of Congress realized almost immediately they made a mistake in levying the luxury tax.

SEN. JOHN BREAUX, (D) Louisiana: (1992) Now there's no question that the economy has hurt the boat-building business, but I think that they were just barely treading water. And what Congress did was come up and kind of put our foot on top of their heads and just shoved them under the water line, and as a result, they really are drowning.

KWAME HOLMAN: It took a relentless grassroots lobbying campaign by the boat builders, but Congress finally did repeal the federal luxury tax on boats in August of 1993. We returned to Rhode Island a few weeks ago to see if the boat-building industry had returned. It had for Dave MacFarlane. Joe Dockery ordered his $2 1/2 million yacht from MacFarlane five days after the luxury tax was repealed.

JOE DOCKERY: It was pretty close to immediately. We were just waiting for it to end, and as soon as it ended, we moved.

KWAME HOLMAN: Ray Lavoie, supervisor of all electrical and mechanical work at Alden, was one of the few survivors of the layoffs.

RAY LAVOIE, Alden Yachts: (inspecting yacht) I think we're all set.

KWAME HOLMAN: He said once the luxury tax was repealed, the turnaround in business was instantaneous.

RAY LAVOIE: Almost immediately, almost immediately, we started selling some boats, and interest picked up, and most of the individuals that we called that were working here came back.

KWAME HOLMAN: Alden now has a backlog of half a dozen boats on order, and its full-time work force is nearly back to where it was before the luxury tax was implemented.

RAY LAVOIE: So it's a good feeling.




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