Defeated on vessel tax cap, boating industry vows to try again next year

A bill originally written to cap Maryland’s vessel excise tax passed the Senate unanimously on Friday. But there’s a catch — it no longer caps the state’s vessel excise tax.


In fact, it no longer has anything to do with that tax or with addressing the problem that prompted the boating industry to call for a cap.

The legislation — Senate Bill 90, sponsored by state Sen. John C. Astle, D-Annapolis — is now a measure to put 0.5 percent of the money from the motor fuel tax into the Waterway Improvement Fund, which funds dredging and other projects intended to keep the state’s waters healthy.

“That’s not what I intended when I put the bill in,” Astle said. “But we’ve been trying for some time to get an increase in money to the Waterway Improvement Fund. So I’ll take it and declare victory.”

Del. Ron George, R-Arnold, who sponsored the same legislation in the House, said the boating industry and the Marine Trades Association of Maryland — which both contend the tax cap is needed to revive boat sales in Maryland — couldn’t overcome opposition from the state Department of Natural Resources.

As in past years, the DNR opposed a cap because it argues that the revenue going into the Waterway Improvement Fund would be reduced by the loss of the money put in by the owners of large yachts.

George’s bill never got out of the House Ways and Means Committee.

Now, George has gone to the office of House Speaker Michael E. Busch, D-Annapolis, and convinced it to send a letter on his behalf asking DNR to work with the Marine Trade Association before next year’s session.

Maryland’s vessel excise tax requires boat owners to pay 5 percent of the value of their boat if they buy the boat in the state or keep their boat here longer than 90 days a year.

Brokers say boat purchases are lagging in Maryland because residents go to tax-free Delaware or to Virginia, where there’s a 2 percent tax and a $2,000 tax cap.

Maryland’s boat sales fell from $183 million in 2010 to $162 million in 2011, placing the state No. 26 in the nation. In 2008, boat sales were $248.5 million.

Supporters had argued the bill would draw more boats and larger boats to the state, stimulating Maryland’s lagging marine industry not just by increasing the sale of boats but by expanding the demand for slips, boat accessories and maintenance services.

Susan Zellers, executive director of the Marine Trades Association of Maryland, said that between her organization and marina owners and boaters, legislators on the committees probably received more than 200 calls apiece on the issue since January.

But opponents said a cap was a “tax break for the rich,” Zellers said.

By capping the tax at $10,000, the bills by George and Astle would have benefited boat owners whose vessels are worth $200,000 or more.

Zellers said that at one point during the Senate hearing, the boating industry tried to make a deal. She said it proposed raising the cap from $10,000 to $12,000 and putting a four-year sunset on it.

“It didn’t matter to us,” Zellers said. “We just wanted to get some movement.”

But the bills continued to sit in the Senate and House committees. After a month, the Senate Budget and Taxation Committee redrew the Astle bill to benefit the Waterway Improvement Fund, and that measure passed the Senate.

George said that at first the House subcommittee didn’t want to pass the cap because “they didn’t want to help rich boat owners.”

George said he explained the cap’s benefits to the committee members, but then lawmakers got a directive from Gov. Martin O’Malley’s office to avoid any “special deals” that could cut any revenue to the state government.

The vessel excise cap’s fate has been an “extremely frustrating” experience, Zellers said.

“I don’t know what else we could have done. I don’t know what else they needed to hear,” she said.

Astle said he hoped the tax cap can be enacted next year. He said the issue is still on the table because the Senate committee didn’t reject the idea.

“This is a subtle difference. They didn’t say ‘You know, the cap, we’re done with this.’ They said ‘You know, there’s something here. Let’s just alter this a little bit and we’ll give something back to the boating community.’ “

George said the DNR can understand the benefits the tax cap could bring to the Waterway Improvement Fund.

“This next year I think we’re definitely going to get it done,” George said.

Zellers said in an email that while the loss was tough, she’ll be back too.

“I understand that the process sometimes takes more than one session. Tough as it is right now, I need to remain upbeat and positive about the process,” she said.

“We had a pretty significant number of lawmakers take notice and express their concern about the future of this industry and I am hopeful that they will work with us and the department to come up with a stronger bill for next year.”


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