Explaining Kerry's Yacht-Tax Dodge
The Boston Herald is keeping the heat on Senator Kerry about the half-million dollars in excise and in sales-and-use taxes he has dodged by mooring his yacht in Rhode Island, rather than in the state he represents in the Senate, Massachusetts. Today's Herald reports that the "clearly perturbed" senator "slammed the door" on reporters who were asking him about the matter — but only after cryptically responding to a question about whether he had brought the boat into Massachusetts by saying, "It depends on who owns it."
Earlier Herald coverage has reported that the boat is owned by a Pittsburgh, Pa.-based limited liability company, Great Point LLC, and that "Pittsburgh is home to Kerry's ketchup heiress wife, Teresa Heinz Kerry." And indeed, a 2004 New York Times article on the partial release of Teresa Heinz Kerry's tax return in connection with Senator Kerry's presidential campaign reported, "The Kerrys file separate tax returns, a common arrangement when one spouse is wealthy...Her official place of residence was blacked out in federal tax return, but a spokesman for the Kerry campaign said it was in Pennsylvania."
If Great Point LLC is owned or controlled by Pennsylvania-based Teresa Heinz Kerry rather than by Massachusetts-based John Kerry, it may be that no Massachusetts use tax on the boat is owed.
And if you think mooring the yacht in Rhode Island rather than in Massachusetts is a tax dodge, the senator's spouse's decision to be a Pennsylvania resident rather than a Massachusetts one for tax purposes has its own advantages. The Massachusetts state income tax is 5.3%, while Pennsylvania's is 3.07%, according to the Tax Foundation. The Massachusetts estate tax is up to 16%, while the Pennsylvania inheritance tax maxes out at 4.5%. The lost income to Massachusetts as a result of Teresa Heinz Kerry's decision to be an official resident of Pennsylvania probably dwarfs the $500,000 or so at stake in the debate over where the yacht is moored.
As recently as March of this year, Senator Kerry issued a press release touting "new tools" for the IRS "to detect, deter and discourage offshore tax abuses that currently allow companies and individuals avoid paying taxes." He said, "It repulsed me that while the average American plays by the rules and pays taxes, some of the biggest corporations avoid paying their fair share." And he vowed to "close the loophole that allows for offshore tax havens to help taxpayers shirk paying their fair share."
I'm not defending offshore tax havens, but why shouldn't American individuals and businesses have the ability to do exactly what Senator Kerry and his wife do — organize their affairs within the law to minimize the amount of their money that they have to pay the government and maximize the amounts they can keep for themselves? Mr. Kerry finds it repulsive or unfair when other people do that, but apparently not so repulsive or unfair that he changes his own family's behavior on the matter, to the extent that it is within his control.
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