For many boat dealers, the United States Sailboat Show opening today in Annapolis will be a bittersweet affair.
Looming over the City Dock and harbor, where dealers have gathered for 20 years to sail their stuff and woo potential buyers, is the fear of what a 10 percent tax on boats and yachts costing dTC more than $100,000 would do to an already wayward marine industry.
On Sunday, the 10 percent tax on so-called luxury items was included in a five-year budget plan aimed at easing the federal deficit. The plan was rejected by the House early this morning, however.
Dealers are expected to use the potential tax as a marketing tool at this weekend's show -- the largest of its kind in the country -- as they try to get the expensive boats out of their inventory before the tax takes affect.
Mick Blackistone, executive director of the Marine Trades Association of Maryland, said he hopes the boat show will "make something very positive for the short term out of something that is likely to have a devastating effect on the industry."
But industry observers acknowledge that the marketing ploy is indeed a very short-term solution to a problem that is likely to cost 8,000 jobs in the boating industry, which has already laid off one-sixth of its 600,000 employees because of a two-year sales slump, the National Marine Manufacturers Association in Chicago said.
Sales, according to the association, have tumbled 20 to 30 percent this year compared with 1989, when they were down 15 percent from the year before.
Although boats costing more than $100,000 account for only 5 percent of sales, marine trade groups say that expensive boats require more man-hours because they are larger and heavier.
"Canvas people are going to lose canvas jobs, paint people are going to lose paint jobs, and the list goes on and on," Mr. Blackistone said.
Many industry observers say the bulk of the $32 million a year the federal government expects to reap from the proposed luxury tax could be eaten up in unemployment benefits.
"The luxury tax coupled with the gas tax and the mini-recession -- these three things are going to be the kiss of death for the marine industry," said Thomas Trainer, owner of McDaniel Yacht Basin Inc., which is based in North East.
"If the tax goes through, I don't know what people can do. Hopefully, people will adjust," said Jay LeBow, owner of Annapolis Sail Yard Ltd. "Some of the weaker builders are going to go under."
Some boat sellers said they probably will start pricing many $100,000 boats at $99,000 so that buyers can escape the tax.
Area dealers said they realize they can't rely on the assumption that people who can afford boats costing more than $100,000 don't care about a 10 percent tax on top of a 6 percent sales tax.
"All of the sudden, the guys everyone says are rich are starting to think twice about buying a boat," said Gary Proteau of the National Marine Manufacturers Association.
The effect of the slipping boating market can be seen in the number of exhibitors scheduled to appear at this year's show. Fewer than 200 boats will be on display, down from close to 300 last year, said Jeffrey Holland, spokesman for Annapolis Boat Shows Inc.
Part of the reason is that many dealers have gone out of business and others don't want the expense of attending the show.
Nora Atkins, part owner of Atkins Yacht Sales in Annapolis, said her small boating business, with annual sales of about $500,000, opted out of the sailboat show this year.
"The recession is very, very real, and it's taking a toll first on high-ticket items," she said. "We're just focusing now on trying to weather the storm."
The show runs from 10 a.m to 7 p.m. today through Sunday and 10 a.m. to 6 p.m. Monday. Admission is $8 for adults and $4 for children under 12.