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From The 90 Day Yacht Club Guide to Ensenada

March 2005

Volume 3 , Number 3

 

 

A true traveler has no fixed plans and is not intent upon arrival®

 

 

 

 

 

 

  “Your true traveler finds boredom rather agreeable than painful. It is the symbol of his liberty-his excessive freedom. He accepts his boredom, when it comes, not merely philosophically, but almost with pleasure.”

-Aldous Huxley

 

A Seaside Shanty for sale on the cliffs near Ensenada

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THE LUXURY TAX ON YACHTS IN THE 1990’S

Will History Repeat the Results of the Dissolute Intent of that Fiasco?

The impact of the 10% tax on the yacht industry was sufficiently severe that the tax was repealed in 1993. The lessons of that devastating "luxury tax" obviously was totally lost in California's Democratic circles. Ever since a group of angry colonists dumped crates full of tea into Boston Harbor back in 1773, American’s emotions about taxes levied by the government have run high.  

Tax levies on articles that are not essential to a normal standard of living are not new. Such taxes may be imposed strictly for revenue purposes or they may be intended to discourage consumption of certain articles as illustrated by the tax on French lawns and laces in the 18th century in England. In modern times such “conventional necessities” as alcohol, gasoline, tobacco, jewelry, furs, amusements, private automobiles, and candy have been taxed. In the United States, luxury taxes have been levied frequently, especially in wartime, to raise revenue as well as to discourage the flow of essential resources into the production of items not related to the national effort.

Usually our grumbling about these seemingly unfair assessments receives no response from Washington. In this case though, just before the 225th anniversary of the Boston Tea Party, American citizens once again showed lawmakers how they really felt, and our government actually responded in a favorable and reasonable manner. Granted, thousands of pounds of tea weren't dumped into any harbor when Congress put a luxury tax on yachts, private planes, jewelry, furs and expensive cars during the last decade, inevitably consumers were outraged and found a common sense way to show their distain for this inane new law.

               Initiated in 1991 Washington levied a 10 percent tax on boats above $100,000, jewelry and furs above $10,000 and private planes above $250,000. At first glance, it seemed like the Democrat-controlled House was playing Robin Hood -- taxing the rich for being...well, rich. But the wealthy boat buyers wouldn't put up with it and an impromptu boycott began. New England yacht sales dropped, and then stagnated, workers were laid off, and the tax was quickly repealed on everything except automobiles. This turn of events upset both auto dealers and auto buyers alike.

               In the automobile industry a 10 percent luxury tax was added onto cars priced above $30,000. You could buy $30,000 worth of any car luxury tax free, but if you bought a $40,000 car, you'd be charged an extra 10 percent on the added $10,000. This supplementary cost was an extreme hardship to the consumer as the average new car in those days was less than $20,000. In response, sales of those luxury vehicles dropped significantly, and Congress took note. In 1993, the luxury taxable purchase price of a vehicle was raised to $32,000 and in 1996 it was adjusted to $34,000.

               But accounting for inflation simply wasn't enough to appease consumers who resented what they deemed to be a "success penalty" in the first place. Although luxury car buyers didn't go to the extremes that the yacht buyers did (the now infamous yacht buyer boycott), they did fight back with their greatest weapon of all: purchasing power. The continued dip in luxury-car sales, along with the support of organizations like the American International Automobile Dealers Association (AIADA), who lobbied for the repeal of the tax, finally got some attention. In August of 1996, the "envy tax" as some call it, got pushed a little bit further out the door after President Clinton signed the Small Business Job Protection Act, sending the ill-favored automobile luxury tax on a seven-year phase-out plan.

               Although the memory of this tax may have left a bad taste in everyone's mouth for a while, its repeal is actually a success story reaffirming the beliefs on which America was founded. This message was not so celebrated by the high-end car dealers, who suffered a huge drop in sales during 2002 as buyers waited for the tax to expire on January 1, 2003.

               To stem the tide of the boater boycott, Patrick Kennedy of all people proposed a tax credit for those who purchase an American luxury yacht at least 50 feet long.  “Rich people can go anywhere to buy their boats,” he stated “What my tax cut will do is hopefully encourage them to buy their boats here.” “Here” included boat-building communities in Kennedy’s district of Rhode Island and in North Carolina, home to companies such as Hatteras Yachts in New Bern, North Carolina. Hatteras executive Bryant Phillips agreed with Kennedy that there are multiple reasons to encourage the wealthy to buy American-made yachts and, in the process, help preserve the jobs of the people who build them. “You see, every time they buy one of these,” Phillips said, “they are keeping a thousand families in New Bern clothed, fed, educating their kids. It’s a positive industry.”

               It wasn’t long until the die-hard Democratic luxury tax initiators realized they had missed the mark. Democrats like Ted Kennedy and then-Senate Majority Leader George Mitchell had crowed publicly about how the rich would finally be paying their fair share and privately about convincing then President George H.W. Bush to renounce his “no new taxes”/“read my lips” pledge.  The taxes took in $97 million less in their first year than had been projected for the simple reason that people were buying a lot fewer of these goods. Boat building, a key industry in Kennedy and Mitchell’s home states of Massachusetts and Maine reported a 77 percent drop in sales that year, while boat builders estimated layoffs at 25,000. Can you imaging the rhetoric thrown about when this tax was debated? Well, that "we'll only soak the rich" plan put 25,000 poor people out of work and crippled an industry.

               Ponder this, how many millionaires has Bill Gates created directly through Microsoft; computer supply companies, computer support organizations, companies that provide internet infrastructure, etc. When you tax the rich you stifle job creation, and business expansion. When Washington put the yacht luxury tax into place to "tax the rich" they almost destroyed the entire yachting industry. The rich didn't buy and the middle class builders all lost their jobs. When Kerry recently ran for President he talked as if the rich got that way by marrying into it, like he did, but that is not the case. The rich entrepreneur takes the risks, they should reap the rewards, and the middle class will benefit through the jobs they create.

               I just took a swing through all of the southern California West Marine and Boat US stores that carry my 90 Day Yacht Club book. The consensus of the managers of the stores that I visited is that they are currently only selling gear for small trailerable boats and the 25 to 30 foot boat. The Grady-Whites, Parkers, and Boston Whalers are selling to those that just simply want to get out on the water until they can buy a bigger boat under the 90 Day Law. That means that little electronics packages, small fenders, boat wax and broken trailer lights are selling and little else. Is this going to sustain the marine trades until the 90 Day law is reinstated July 1st, 2006??? Meanwhile those that would be buying a bigger boat are going to keep their boats an extra year and a half to wait out the current 1-year statute. That effectively kills two yacht deals, the principal yacht sold and the trade-in that will be sold after the initial sale.

               Sales taxes are not destructive UNLESS they are used in addition to income taxes, property taxes, luxury taxes, fees, assessments, etc. If they were the SOLE tax instruments, they'd be fair. The end of any form of tax is such a rarity that it's well worth celebrating. Although technically not a new tax, maybe to be considered a “stealth luxury tax”, the current 1-year offshore delivered sales tax law is starting to deeply effect the marine trades in California. Hopefully the re-instatement of the 90 Day Offshore delivered sales tax savings law will be celebrated sooner than the now mandated July 1st 2006 date, as the yacht industry is again suffering in California, much as the entire yacht industry suffered in the early 1990’s.

_______________________________________

The CS Yacht Owners Associations bring together people from all over the world who own, have owned or wish they owned a CS yacht.[CS34 on a close reach]This wonderful line of racer/cruisers was built in the 70s and 80s, in sizes ranging from 20' to 40'. Canadian Sailcraft unfortunately stopped manufacture in 1992 - a victim, like many other quality boat companies, of the ill-advised U.S. luxury tax. But their boats sail on, providing tremendous pleasure to their proud owners.

 

 

 

RAINY DAY, DREAM AWAY

           Are you tired of the rain up there in LA and San Diego?  Here in Ensenada we have only received a wisp of the torrential rains as the storms are spiraling onshore into Southern California and we are only getting the extreme southern edge of the precipitation. Locally the inch count is still at the typical 10 to 15 inches for this year while north of us the totals are in the 30+ inches and is threatening to surpass an all time record for rain of 38 inches set in the year 1884. If your home is secure and will not soon be buried by mud or may possibly seen schussing down the hill in a landside, perhaps a holiday in Ensenada with your yacht may be a welcome respite from the deluge.  Visit our archived October 2004 Newsletter for a more complete overview of our sunny Baja California weather.

 

 

MISSIONS, PUEBLOS AND PRESIDIOS

The area known as California was first claimed for the Spanish Crown in 1542 by Juan Rodriguez Cabrillo when San Diego Bay was discovered. However, the region remained unexplored for more than two hundred years. In this time interval, New Spain's expansion in the northern frontier continued along a line of one hundred presidios (military garrisons or forts) in the present- day Northern Mexico and the American Southwest. However, in 1769, in response to concerns over possible intrusion by Russia and England into the area, the colonization of Alta (Upper) California, was initiated by the Spaniards. Hispanic settlement of what is now California began when the Presidio and Catholic mission of San Diego were established. By 1823, nineteen more missions dotted the California coast from San Diego to Sonoma, along with several military presidios and civilian communities known as pueblos. With few exceptions, the settlers and their descendants stayed close to the coast. There were few extensions into the California interior.

            Spain's colonization strategy of California was intended to follow the same pattern as in Northern Mexico and in the American Southwest through the establishment of missions, pueblos and presidios, each having a distinct function.

            Missions were intended to be the temporary facilities for turning natives into Christian citizens of the Spanish empire, thus providing a civilian population, a labor force and auxiliary military support for protecting Spanish interests in the area. By 1773, five missions had sprung up in California. These were San Diego, San Gabriel, San Luis Obispo, San Antonio de Padua, and San Carlos. The Franciscan Father Serra supervised their construction. These Franciscan outposts were the foundations on which California would grow. A total of twenty-one missions were established in California in the following years.

            The pueblos (towns) were supposed to be composed largely of families recruited in Mexico. They were expected to provide agricultural support for the presidio companies, while also expanding population centers and military reserves in case of invasion. However, only three pueblos were established under Spanish rule in California. These were the pueblos of Branciforte, of Los Angeles and of San Jose.

            Finally, the presidios were the military outposts established to provide coastal defense from foreign invasion and to defend the missions and towns. In addition to their military role, they were the civil, economic and social centers for the frontier settlements of Alta (Upper ) California. They served as the centers for government and for communication within California and between California, Mexico and Spain. The presidios were the trading centers, which received and disbursed the annual supply of goods from Mexico, on which the entire population was dependent for survival. And the presidial companies, composed largely of married soldiers and their families, were planted as "seed" communities from which future pueblos would grow, thus strengthening Spain's claims to the region. All of the presidios met to varying degrees the goals assigned to them by the Crown. Most were successful in fulfilling their role as "seed" communities. Pueblos grew up around the forts as military personnel retired from active duty and constructed adobe homes nearby. Military garrisons from the presidios, provided protection to the mission padres and to the settlers for as long as they were needed. Once, in 1818, presidio soldiers defend the coast from a raid by the Argentine pirate Bouchard. Presidio couriers on horseback provided an efficient communication system - an early "pony express" system.

            Most of the twenty one California missions enjoyed great material success for a while, but the natives who were brought within their compounds were gradually decimated by foreign diseases to which they had no immunity. Thus the Franciscan friars were not able to deliver the expected large population of new Spanish citizens to the Crown.

            One of the most dramatic and significant events of the Spanish/Mexican period occurred in 1833, when the Mexican government secularized the missions. This meant that vast mission landholdings were taken over by the government, which in turn awarded them as land grants to Californians. The mission properties were distributed to soldiers in lieu of wages and to Mexican citizens in return for political favors. The Native Americans who remained were assimilated into the local society serving as laborers, household servants and vaqueros (cowboys). Soon huge sprawling ranchos became the basic socio-economic units of the province. While upward mobility remained difficult, some Mexicans succeeded in making the transition into the California elite, particularly with the help of these land grants.

            During the 1821-1846 period, Anglo-Americans began to settle in California. Many of these settlers, particularly those who had come by ship, eventually married Mexican women (usually of the local aristocracy), became Mexican citizens, and obtained land grants. In contrast, Anglo overland pioneers who settled in the Sacramento Valley of northern California brought their families, stayed to themselves, and resisted integration into Mexican society. It was this group that ultimately rebelled in 1846 against its Mexican hosts and formed the short-lived secessionist Bear Flag Republic, which disappeared during the U.S. conquest of California.

            Of the California pueblos, there was no significant growth to the pueblos with the exception of Los Angeles and San Jose, which remained as small villages until well into the American period. The significance of the presidios also diminished as communities eventually assumed the political functions originally centered in the presidios. By the end of the Spanish/Mexican period in 1848 and the US/Mexican war, the presidios were in ruins, due to disuse and cannibalization of building materials. Most of the buildings of these presidios have nearly vanished.

 

SPORTS TALK 690 AM MOVES TO 570 AM

            As of February 2005 the strongest station in the Ensenada area from the states, which had sports talk and radio casts of nationwide baseball, football and other events moved to the Lakers home station on the new frequency of 570 AM. Unfortunately this new station has much less power and is overlaid with static during the day and fades completely at night. But you still have 1090 AM as an alternative, another sports talk station that now has become the strongest local Ensenada sports station. 1090 AM has Padre baseball games, and San Diego State College sports broadcasts, as well as national baseball, football and other sporting events. Every weekend morning from 7 to 9 am you may want to tune in 1090 for Let’s Talk Hookup, a great show to inform you of the most up-to-date fishing news in Southern California. 690 AM now blasts classic music from the middle of the last century (sounds like a long time ago put in that context). Los Angeles based 1070 AM is still our first station of the day to tune in with our coffee, an all news station that keeps us informed on the everyday events of the world. From the safety of our Mexican moored yacht, we can survey the violent weather that has recently lashed Southern Cal (and missed Ensenada), the morning traffic news (yikes), and the scary daily events that surround this peaceful little Mexican town of Ensenada. 

 

OUR EXCLUSIVE MEXICAN MONACO

         This past week I shared a feeling I have had about my stay here at the Marina Coral with another visiting boater. He was commenting on the “another world” sensation experienced within the confines of the Hotel/Marina enclosure and I had to agree, saying it’s as if we were staying at our own miniature Principality of Mexican Monaco. Not really such an extreme comparison, as the security and mood here are excellent. We don’t have a Royal Family, the Casino Square, the Hotel de Paris, an elegant Cartier jewelry store next to the Casino or an annual Formula One race. And it is certainly not as expensive; but we do have a yachting experience located on a huge breathtaking panoramic bay accompanied by a special foreign quaintness hosted by friendly smiling locals. I am daily tremendously thankful for the ability I have been afforded to each day simply be here, my health, and for being able to share the bright future of this wonderfully tranquil area of the world which has perhaps the best climate in the world.

 

 

THE PEARLS OF LA PAZ

Two books by John Steinbeck-his novelette The Pearl and his nonfiction account The Log from the Sea of Cortez-brought widespread attention of American travelers to La Paz, and by the 1950s it was a popular sports fishing destination. But prior to this “discovery” of La Paz by mainstream civilization, much attention had been focused by the pearling industry on this beautiful area on the Sea of Cortez’s western shore. Steinbeck based The Pearl on a famous pearl story he heard while visiting La Paz in 1941. La Paz was for decades the world’s largest supplier of pearls and the mystique of the La Paz pearling industry continues long after the demise of the last pearl harvested.

Pearl gathering in the world goes back at least 7,000 years. Only particular mollusk varieties within the family Pteridae, found only in certain coastal areas off East Asia, Panama, and Baja California can form pearls. Pearl’s develop from sand grains or other small particles that manage to get between an oyster’s mantle and a shell.  The oyster secretes a substance that cushions it from the irritation of the particle-if the grain moves freely during the secretion buildup, the developing pearl is more or less spherical; if it stays in one place or is embedded in the shell it becomes a “baroque” pearl, irregular in shape. Even when the oyster doesn’t contain a pearl, the interior of the shell is highly valued due to its rainbow patina, known as the mother-of-pearl.

The Spanish found Indians along the Sea of Cortez coast wearing pearls and pearl shells as hair ornaments in the early 16th century, and while imperialistically conquering the local tribes added pearls to the list of exploitable resources in Mexico. Soon other foreign marine expeditions were engaged in finding the source of these highly regarded trinkets and the oyster beds that spawned their existence off the Sea of Cortez coastline.

          After a Spanish mutineer reported the presence of pearls in the Bahia La Paz in 1533, harvesting them became one of Conquistador Hernan Cortes’s primary interests while exploiting the lower Sea of Cortez. Between 1535 when Cortes finally managed to establish a temporary settlement at Bahia La Paz, and 1697 when Jesuit padres began missionizing the Baja peninsula, incalculable thousands of pearls were harvested. The Jesuits strongly objected to any secular exploitation of the peninsula, preferring to keep the riches of the Baja within the domain of the church. Hence, during the mission period 1697 to 1768, pearling was restricted to sporadic illegal harvests; many pearls found their way to Europe, where they encrusted the robes of Bishops and Spanish royalty.     

In the mid-19th century, following the secularization of Baja missions, the pearl industry was revived by armadores (entrepreneurs) who hired Yaqui divers from Mexican mainland Sonora to scour the shallow bays, coves and island shores of the local La Paz vicinity and north to Mulege. The invention of diving suits in 1874 revolutionized pearling by allowing divers access to deeper waters and further large-scale harvesting ensued. By 1889 the world pearling industry was dominated by Compania Perlifera de Baja California, based in La Paz.

Intensive harvesting rapidly depleted the oyster beds. Between 1936 and 1941 a mysterious disease killed all the remaining pearls, devastating the town’s economy.  Many La Paz residents today believe the disease was somehow introduced by the Japanese to eliminate Mexican competition in the pearl industry, but it’s more likely the disease simply took advantage of the already weakened remaining pearl population. In response, the Mexican government granted La Paz duty free status that all of the Baja enjoys to this day, transforming it into a busy port for goods from the United States and the Pacific Rim and stimulating tourism from the Mexican mainline.

The boom in the 1950’s due to the popularity of the Steinbeck novels established La Paz as a world-class sports fishing center and destination. But the tourist foray dwindled in the 1970’s, as industrial foreign fishing brought marlin, swordfish, and sailfish to the brink of extinction in the Sea of Cortez and the resort development of Cabo San Lucas eclipsed La Paz as a tourist destination. Since then, gringo visitors to the city have been mostly long-term snowbird retirees attracted by low prices and readily available health care. Today the big game fishing industry is resurrecting and the waters around La Paz are being discovered by a growing number of the vacationing yachters, scuba drivers and sea kayakers.

From the forthcoming “90 Day Yacht Club Guide to La Paz and the Sea of Cortez” currently in development.

 

Most cigarette filters are composed of cellulose acetate, a form of plastic. The white fibers you see in a cigarette filter are NOT cotton, but a plastic that can persist in the environment as long as other forms of plastic. Cigarette butts are the most common form of litter in our everyday world and are estimated to last in your local gutters and in our sea for up to 15 years before they biodegrade… Have you ever looked down at the street gutter at a busy red-lighted left hand turn lane? Everyone seems to think this is the place to empty his or her ashtray- YUCK. Next time you have a family gathering or take a walk along an ocean or bay jetty, look between the jetty rocks and you will see piles of cigarette butts. Mother Earth is not happy, as demonstrated by the recent natural calamities that have befallen our global society. One who smokes a pack a day can potentially litter the earth by the mindless flick of their 20 butts per day, 7,300 items per year. In fact, over 4.5 TRILLION toxic, non-biodegradable cigarette butts are tossed into the environment annually by smokers. Please think before you discard your next butt into our environment. Better still, STOP SMOKING for yourself and the family you love and the family of man we hope to preserve.

 

 

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