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Luxury Tax on Jewelry Proposed - NY & IL

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Todd Gray

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According to Rapaport Diamond News, Jewelers of America (JA) has initiated a letter-writing and fund raising campaign to oppose the introduction of state luxury tax proposals on jewelry and watches. In New York, the most recent state budget includes a luxury tax measure, and the state of Illinois has a specific piece of legislation drafted for the purpose of creating a luxury tax. If passed, both would add a 5 percent luxury tax on all jewelry and watch purchases of more than $20,000.

This from the JA web site:

Luxury Tax Legislation:

With New York State’s December 2008 introduction of a proposed luxury tax on jewelry, this topic has been raised for the first time in nearly 20 years. For the time being, Jewelers of America does not anticipate new legislation at the federal level, but we are keeping a close watch on state activity. Given the budget deficits faced by numerous Governors, we believe there is the possibility of copycat legislation in other states.

As with past fights to repeal luxury taxes, Jewelers of America recognizes the importance of monitoring and keeping our members informed about this issue – especially at a time of economic distress. Luxury taxes unfairly target only selected industries, causing sales to drop and unemployment to rise. In addition, the federal government often pays out more in unemployment benefits to affected workers than it collects in luxury tax revenues, according to studies of past luxury taxes.
 

elle_chris

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hmm
I wonder what most of us New Yorkers would do if that went into effect..
 

glitterata

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I don''t think it would affect MOST of us much, since it''s on purchases of $20,000 and up.

If you can afford to spend $20,000 on jewelry, you can probably afford $21,000.
 

neatfreak

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Date: 2/27/2009 1:24:35 PM
Author: glitterata
I don''t think it would affect MOST of us much, since it''s on purchases of $20,000 and up.


If you can afford to spend $20,000 on jewelry, you can probably afford $21,000.
Very true...
 

elle_chris

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Can and willing to are very different things. If you can find the same type of jewelery out of state where you save a few thousand, why not? Ok, aside from the legality of disclosing it to pay taxes.
 

annadragon

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I have to agree with Elle. No matter if $20k is a drop in the bucket for you or your big splurge it irks me when legislation like this is considered. If we had a true consumption tax system I would feel differently, but we do not. Although, if passed some people perhaps only buying something in the $20k-$80k (arbitrary guess) range will suffer it because of convenience. Otherwise you''ll probably see individuals proposing to spend >$100k spending their $$$ where taxes are easily avoided or not so exorbitant.
 

denverappraiser

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Unfortunately, this sort of policy does not stand on it's own. Although it's true enough that people who can afford $20k could probably also afford $21k, this doesn't mean that they would. What are their alternatives? For starters, they can buy their jewelry somewhere else. This is already being done by folks to avoid sales taxes in high tax jurisdictions and this would be just another reason to avoid local merchants. Why the local magistrate would want to encourage this is beyond me.

I wonder what 'jewlery' is. For example, if someone were to buy an unmounted diamond for $50k in New York and have it mounted by a jeweler in New Jersey, where was the 'jewelry' purchased? What if they simply had it mounted at a different New York jeweler? That is to say, if a customer brings into a New York jeweler a $50k diamond and asks to have it set into a ring, is the jeweler now obligated to charge $200 to set the stone plus $5000 tax because it's now going to be 'jewelry'? If the customer doesn't like the piece and has it restyled, do they owe another $5k because they got a new piece of jewelry out of the deal? If a customer needs to pay tax on the diamond but get it mounted into a doorknob instead, are they entitled to a refund on their taxes because it's not jewelry?

This has been tried before in the hope of soaking the rich. The result is no significant tax collections, there is major damage to an industry populated by workers who are, for the most part, not what you would call rich, and there's a reduction in other taxes, most notably sales taxes but also income and other taxes imposed on the merchants and workers who have now lost the business.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
 

icekid

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Date: 2/27/2009 2:26:27 PM
Author: annadragon
I have to agree with Elle. No matter if $20k is a drop in the bucket for you or your big splurge it irks me when legislation like this is considered. If we had a true consumption tax system I would feel differently, but we do not. Although, if passed some people perhaps only buying something in the $20k-$80k (arbitrary guess) range will suffer it because of convenience. Otherwise you''ll probably see individuals proposing to spend >$100k spending their $$$ where taxes are easily avoided or not so exorbitant.
I am with you guys! I absolutely would be on board for a consumption tax system. However, since we do NOT have that system in place I think they''re out of line here.
 
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