Old Hat
Editorial
While on a recent flying visit to North America for a very important assignment (the first birthday of our grandson), Mrs Editor and I were able to grab a few days R&R in Vancouver, a place I have never seen before. During our stay we found ourselves at Trev Deeley Motorcycles – Canada’s oldest established Harley-Davidson dealer and the second oldest in the world outside the United States. Part of this huge dealership is devoted to a permanent museum, where there is always a themed exhibition taking place, so that’s where we headed. That was mightily impressive, but talking to the staff in this venerable establishment revealed deep concern for the future of America’s most iconic motorcycle brand, and for that matter, its chief local rival, Indian. You’ve no doubt heard of the sabre rattling that has been emanating from Washington, concerning US-imposed tariffs on imported steel and aluminium. The backlash to those sanctions from the EU has been similarly well reported, with tit-for-tat punitive tariffs on certain US products, including motorcycles – read, H-D and Indian. Predictably, these iconic manufacturers have a plan of their own, and that is to take production off-shore. In H-D’s case it already has established manufacturing capacity in India, Brazil and Thailand, while Indian has flown the kite of transferring much of its production to Poland. So the White House measures to shore up local jobs via tariffs look like having exactly the opposite effect, with both of these companies threatening to severely trim their US manufacturing.
Like just about everything, there is a lesson in the past. In 1916, the UK Government imposed an Entertainment Tax – a flat tax on the price of the cheaper theatre seating, escalating to a heavy impost on the dearer seats. The entertainment industry reacted with vigorous protests that saw the flat tax lowered, but the stepped tax remained, meaning that by 1940 the tax on some tickets was higher than the ticket price itself. The US film companies were outraged, with the UK government reaping almost triple the amount of revenue compared to the companies that produced the actual product. Finally in 1949, the powerful J. Arthur Rank organisation declared it would cease altogether unless reductions were made. The tax was abolished in 1960.
However in the interim, the wily Chancellor of the Exchequer, seeing the writing upon the wall, began to diversify the entertainment tax into new areas. Speedway racing was one, which was mysteriously classified as non-live entertainment and therefore subject to a tax of 48%, whereas sports such as football and boxing paid only 15%. This thinking was rapidly extended to the incomes of prominent sports figures who were to be classified as entertainers. At its peak, that personal tax rate reached 98%, meaning that top racing drivers such as Jim Clark and others moved to Europe and ceased paying UK tax altogether. Rock stars, such as the Beatles, were on a similar boat to oblivion and followed suit. Even as late as the ‘seventies, Britain’s top personal tax rate was 83% and the pool from which it was drawn rapidly diminished as the exodus continued unabated. Similarly, the so-called Wealth Tax of 1974 saw a flood of antiques and especially works of art leave the UK to avoid the impost, never to return. By 1989, Chancellor Dennis Healey, one of the key proponents of the tax admitted, “…you should never commit yourself in Opposition to new taxes unless you have a very good idea how they will operate in practice. We had committed ourselves to a Wealth tax; but in five years I found it impossible to draft one that would yield enough revenue to be worth the administrative cost and political hassle.”
In terms of quality and production efficiency, it probably does not matter much where future Harleys and Indians are actually built, but try telling that to the workers in Milwaukee (H-D) or Spirit Lake, Iowa (Indian). Booming loud in the corridors of history are chilling examples of the collateral damage and grubby consequences of schemes that have not been correctly thought through before implementation. All aboard for the Indian factory tour in Zachodniopomorskie?