Republicans go overboard criticizing John Kerry's yacht-tax dodge

I voted for the guy to be president in 2004, but I never much cared for Sen. John Kerry. So to my conservative friends now mocking the Massachusetts liberal for having saved $500,000 in taxes by docking his $7 million yacht in Rhode Island, I say, "Have fun."

But only to a point.

When Republicans use Kerry as a lesson on the wisdom of their tax philosophy, they totally miss the boat. On the contrary, he's a great example of why they are wrong.

Start with the spiel that states with the lowest taxes always win. Rhode Island repealed its Boat Sales and Use Tax in 1993. Without a doubt, that helps a local pleasure-boat industry, which employs builders, maintenance workers and marina operators.

But Newport, where the Kerrys kept their 76-foot sloop Isabel, has hosted world-class sailing for well over a century. There are reasons for its appeal as a yachting mecca other than lenient tax policy on luxury vessels — and do note that Massachusetts still has lots of marinas full of big boats.

Does running a tax haven for yachtsmen make Rhode Island smart or a sucker? If Kerry can pocket half a million by moving his hulk there from Massachusetts, why isn't the Ocean State getting a piece of that? Rhode Island could have taxed the Kerry yacht at half the rate of Massachusetts and collected $250,000.

Let us now repair to the pilothouse wet bar and discuss how people like Kerry fit into the Republican argument for cutting rich people's income taxes. My conservative friends insist that taxing the wealthy makes them less able to employ the rest of us. Thus, the plan to let the Bush tax cuts expire for the highest brackets is a "job killer." It would especially hurt small businesses, the source of most employment.

Republicans overboard! It happens that only 3 percent of small-business owners make enough money to be taxed at the highest levels, according to the Joint Committee on Taxation. In other words, 97 percent of small businesses would be untouched by a restoration of the two top pre-2001 income tax rates. Furthermore, the richest 3 percent of "small businesses" tend to be an elite group — corporate law practices, real-estate partnerships, accounting firms.

Last year, the Kerrys made between $100,000 and $1 million leasing their Gulfstream V private jet, according to their financial disclosure. That's a small business.

Republican leaders like to say that raising the plutocrats' taxes amounts to "punishing success." Is that true? Some people do make fortunes building great American enterprises. But they prosper under all tax regimes. Others hit the mother lode by closing U.S. factories or suing others. Then there are the heirs.

John Kerry was affluent in his own right, but his fabulous wealth comes from his success in getting Teresa Heinz to marry him. Teresa Heinz obtained her fortune from her first husband, the late H. John Heinz III. He got the money from his father, H. John Heinz II, who inherited from his father (whose name was Howard), who inherited from his father, the original Henry J. Heinz.

The founder of what became H.J. Heinz Co. began to make horseradish sauce and then pickles in 1869. Ketchup came along in 1876. When Henry J. Heinz died in 1919, his company had thousands of employees and a reputation for treating them well.

How does his success turn Teresa and John Kerry three generations later into American entrepreneurs needing low taxes to continue their good work? Perhaps my Republican friends can explain that to me.

Laugh all you want at John Kerry. At least he's willing to raise income tax rates on people like him.

Providence Journal columnist Froma Harrop's column appears regularly on editorial pages of The Times. Her e-mail address is fharrop@projo.com