Luxury Cap Act

AN ACT

To lessen the production and consumption of unnecessary, wasteful, and environmentally damaging luxury goods and services.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled

SECTION 1. SHORT TITLE.

(a) This Act may be cited as the ‘‘Luxury Cap Act.”

SEC. 2. FINDINGS.

(a) Congress finds that—

(1) Limiting global temperature rise to 1.5°C requires reducing fossil fuel consumption;

(2) Emissions from private jets and luxury yachts represent a disproportionately large share of the United States’ carbon emissions;

(3) The production of luxury articles such as clothing, watches, and jewelry contribute to environmental degradation by eroding biodiversity, polluting extraction sites of rare minerals, and contributing to the loss of other sources of natural capital;

(4) The production of luxury goods contributes to worker exploitation around the world;

(5) Luxury goods have been subject to Federal excise taxation during the Second World War and in the Omnibus Budget Reconciliation Act of 1990;

(6) Unrestricted luxury consumption is not in the interest of the United States.

SEC. 3. DEFINITIONS.

(a) In this Act—

(1) “Act” refers to the “Luxury Cap Act.”

(2) “consumer aircraft” refers to any aircraft produced or distributed for sale or for use, consumption, or enjoyment by private individuals or entities.

(3) “jewelry” means all articles commonly or commercially known as jewelry, whether real or imitation, including watches.

(4) “improvement” is the provision of property or a service in any manner, including by way of sale, transfer, barter, exchange, license, rental, lease, gift, or disposition, that is a provision of—

(A) tangible personal property that is installed in or on, or is affixed to, the subject item;

(B) a service that modifies the subject item and is physically performed in respect of the subject item; or

(i) For the purposes of this Act, the provision of property or a service is deemed not to be an improvement to a subject item if it is;

(I) the provision of a repair, cleaning, or maintenance service in respect of the subject item;

(II) the provision of tangible personal property to replace other tangible personal property that is a part of the subject item and that is damaged, defective or non-functioning; or

(III) the provision of tangible personal property or a service that specially equips or adapts the subject item.

(5) “Luxury goods” refers to —

(A) Yachts;

(B) Consumer Aircraft;

(D) Jewelry, clothing, and accessories whose price exceeds $10,000; and

(E) Residential property of 5,000 square feet or more.

(6) “Sale” refers to the transfer of ownership of an item pursuant to an agreement between a seller and a purchaser, the item being delivered or made available in the United States in relation to the agreement.

(A) In this Act, a seller transfers ownership of a subject item to a purchaser even if, at the time ownership is transferred, the seller retains partial ownership or transfers partial ownership to any third person.

(B) In this Act, the sale of a subject item to a purchaser is completed at the earlier of—

(i) the time at which possession of the subject item is transferred to the purchaser or to another person, and

(ii) the time at which ownership of the subject item is transferred to the purchaser.

(7) “Secretary” refers to the Secretary of the Treasury.

(8) “Yacht” refers to any vessel used exclusively for pleasure that measures more than sixteen feet in length from end to end over the deck, excluding sheer.

SEC. 4. FREQUENT FLYER TAX.

(a) GENERAL RULE.— There is hereby imposed an escalating tax applied to on commercial airlines over a one-year period.

(1) The Secretary shall develop a tax schedule for outbound flights starting at the rate of zero for the first outbound flight and increasing progressively with each outbound flight thereafter.

(2) The schedule shall be designed to cap the total amount of flights in order to stay within the United States’ share of the global carbon budget for aviation as determined at the 2015 Paris Climate Agreement (24 billion tons of CO2).

(3) The Secretary shall complete this schedule no later than July 1, 2025.

(b) OPERATION.— The Administrator of the Federal Aviation Administration (FAA) shall create a database with information on the number of flights each passenger has taken.

(1) Passengers shall submit their passport numbers to the relevant airlines before purchasing tickets.

(2) Airlines will send passport numbers to the FAA providing the number of flights the passenger has taken and the level of tax they should be charged.

(3) Once a ticket has been sold, airlines will send a notification to the operator of the database, confirming that submission of the passport number by the passenger resulted in a payment and a flight.

(4) Airlines will be taxed in proportion to the tax schedule established by the Secretary in paragraph (a)(1) of this section.

(1) Flight crew; cabin attendants; persons escorting a passenger or goods; persons undertaking repair, maintenance, safety, or security work or ensuring the hygienic preparation and handling of food and drink; children below the age of 2 years who are not allocated a separate seat; children below the age of 12 years and in the lowest class of travel; persons carried free of charge under a statutory obligation; and passengers on connecting flights; and

(2) Passengers and crew on emergency/public service flights.

SEC. 5. TAX ON CONSUMER AIRCRAFT.

(a) GENERAL RULE.— There is hereby imposed on the first sale of any consumer aircraft a tax equal to ten (10) percent of the price to the extent such price exceeds $557,000.00 in 2022.

(b) EXCEPTIONS.— The tax imposed by this section shall not apply to the sale of any aircraft if more than 80 percent of the flights taken by the purchaser are for the express purpose of trade or business.

(1) On the income tax return for each of the first taxable years ending after the date an aircraft on which no tax was imposed by paragraph (2) was placed in service, the taxpayer filing such return shall demonstrate to the satisfaction of the Secretary that the use of such aircraft during each such year met the requirement of paragraph (2).

(2) The tax imposed by this section shall not apply to the sale of any aircraft for use by the purchaser exclusively:

(A) in the aerial application of seeds or fertilizers;

(B) in a trade or business of providing flight training; or

SEC. 6. TAX ON YACHTS.

(a) GENERAL RULE.— There is hereby imposed on the first sale of any yacht a tax equal to ten (10) percent of the price to the extent such price exceeds $223,000.00.

(b) EXCEPTIONS.— The tax imposed by this section shall not apply to the sale of any yacht for use by the purchaser exclusively in the active conduct of—

(1) a trade or business of commercial fishing;

(2) transporting persons or property for compensation or hire; or

(3) any other trade or business unless the yacht is to be used predominantly in any activity constituting entertainment, amusement, or recreation as specified in industries assigned a North American Industry Classification System code beginning with 71.

SEC. 7. PASSENGER VEHICLES.

(a) IMPOSITION OF TAX.— There is hereby imposed on the 1st retail sale of any passenger vehicle a tax equal to ten (10) percent of the price to the extent that such price exceeds $70,000.

(b) PASSENGER VEHICLE.— For purposes of subsection (a), the term ‘passenger vehicle’ means any 4-wheeled vehicle—

(1) that is manufactured primarily for personal transportation use on public streets, roads, and highways; and

(2) that is rated at 6,000 pounds unloaded gross vehicle weight or less.

(1) Trucks and Vans.— In the case of a truck or van, paragraph (2)(b) shall be applied by substituting ‘gross vehicle weight’ for ‘unloaded gross vehicle weight’.

(2) Limousines.— In the case of a limousine, paragraph (1) shall be applied without regard to paragraph (2) thereof.

SEC. 8. JEWELRY.

(a) IMPOSITION OF TAX.— There is hereby imposed on the 1st retail sale of any jewelry a tax equal to ten (10) percent of the price for which so sold to the extent such price exceeds $10,000.

SEC. 9. FURS, CLOTHING, AND ACCESSORIES.

(a) IMPOSITION OF TAX.— There is hereby imposed on the 1st retail sale of the following articles a tax equal to ten (10) percent of the price for which so sold to the extent such price exceeds $10,000—

(1) Articles made of fur;

(2) Articles of which such fur is a major component;

(3) Articles of clothing or footwear intended to be worn on or about the human body; and

(4) Handbags, luggage, umbrellas, wallets, and other goods commonly or commercially known as accessories.

SEC 10. SECOND AND VACATION PROPERTIES.

(a) IMPOSITION OF TAX.— There is hereby imposed on all second home and vacation properties a tax of 10% of the assessed value of the home.

(1) For the purposes of this section, a second home and vacation property are defined as residential properties visited for at least 14 days per year or used as a residence for at least 10% of the days it is rented out.

SEC. 11. PROHIBITIONS.

(a) It shall be unlawful to manufacture for sale, offer for sale, or distribute in commerce the following items—

(1) Yachts over 80 feet in length;

(2) Consumer aircraft designed for over 4 passengers; and

(3) Residential properties of 25,000 square feet or more.

SEC. 12. CONSUMPTION AND PRODUCTION AND CAPS.

(a) Per capita consumer spending on luxury goods shall not exceed $228,000.00 per annum.

(b) Annual production volume of luxury goods in the United States shall not exceed the production volume of 2024.

(c) The annual caps established by this subsection shall be reduced by 10% for each year following enactment of this Act.

SEC. 13. INFLATION.

(a) GENERAL RULE.— All taxes established by this act shall be adjusted annually based on an inflation index as determined by the Administrator.

SEC. 14. SPECIAL RULES.

(a) USE TREATED AS SALE.— If any person uses an article taxable under this Act (including any use after importation) before the first sale of such article, then such person shall be liable for tax under this subchapter in the same manner as if such article were sold to him.

(b) LEASES CONSIDERED AS SALES.— Except as otherwise provided in this subsection, the qualified lease of an article (including any renewal or any extension of a lease or any subsequent lease of such article) by any person shall be considered a sale of such article.

(1) QUALIFIED LEASE.— For purposes of subsection (b), the term ‘qualified lease’ means —

(A) any lease in the case of a yacht or an aircraft; and

(B) any long-term lease (as defined in section 4052) in the case of any passenger vehicle.

(c) COMPUTATION OF TAX.— In the case of a qualified lease of an article which is treated as the first sale of such article, the tax shall be computed on the lowest price for which the article is sold by vendors in the ordinary course of trade.

(d) DETERMINATION OF PRICE.— In determining price for purposes of this subchapter —

(1) there shall be included any charge incident to placing the article in condition ready for use

(2) there shall be excluded —

(A) the amount of the tax imposed by this Act; and

(B) if stated as a separate charge, the amount of any retail sales tax imposed by any State or political subdivision thereof or the District of Columbia, whether the liability for such tax is imposed on the vendor or vendee.

SEC. 14. IMPLEMENTATION.

(a) This Act shall take effect on January 1, 2028.