I was interested in reading Ira Stoll's blog, Explaining Kerry's Yacht-Tax Dodge, for three reasons: (1) I work with clients all of the time who decide to change their domicile or move their business to reduce their tax burden; (2) I grew up in Pittsburgh and remember smelling the vinegar being made at the Heinz factory on a warm summer's night, and (3) I put Heinz ketchup on just about everything I eat. In any case, as the blog explains, Senator John Kerry (D-MA) decided to dock his $7 million yacht, Isabel, in Newport, Rhode Island, instead of in his home state of Massachusetts, and in doing so he has avoided paying about $500,000 in Massachusetts excise and sales taxes. To make matters worse, Kerry, who is, by the way, the wealthiest active U.S. Senator, had the custom-built yacht made in New Zealand, shunning the willing and able boat builders of New England.
But as it turns out, Kerry isn't the legal owner of the yacht - it's owned by a Pittsburgh-based business named Great Point, LLC. For those unfamiliar with Kerry's connection to Pittsburgh, his wife, Teresa Heinz Kerry, is the widow of U.S. Senator H. John Heinz III (R-PA), the son of H.J. Heinz II, heir to the H.J. Heinz Company. Senator Heinz died in a plane crash in 1991 and Teresa Heinz married John Kerry in 1995.
Getting back to the taxing issue of the yacht, when Kerry ran for president back in 2004 it was revealed that he and his wife filed separate income tax returns and Teresa Heinz Kerry claimed Pennsylvania as her state of domicile. When comparing taxes between Massachusetts and Pennsylvania, both states collect income taxes, but the flat rate collected in Massachusetts is 5.3%, while Pennsylvania's flat rate is 3.07%. On the death tax side, Massachusetts collects a state estate tax for estates valued over $1,000,000 with a top rate of 16%, while Pennsylvania collects a state inheritance tax for transfers to children at the flat rate of 4.5%. So on the income and death tax scale, Pennsylvania ranks below Massachusetts. And who can begrudge someone for choosing their domicile, or where they dock their yacht, tax-wisely? We can choose to live wherever we want and for whatever reasons we deem to be important, and as I've said many times before, the wealthy do choose where they live and where they do business - and where they dock their $7 million yacht - based on income and death tax consequences, not to mention excise, sales and use taxes. For them it's just common dollars and sense.
But hold on - in response to the overwhelming negative press Kerry has suffered by docking Isabel in Newport, yesterday he agreed to pay $500,000 in taxes to the Massachusetts Department of Revenue. He'll just have to wait until he retires to change his domicile.
- Jessica Fargen for The Boston Herald - Political shipwreck
- Jeffry Bartash for MarketWatch - Kerry to pay yacht tax in effort to cast off controversy
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