What is a ‘Luxury Item’
An item that is not necessary for living, but is deemed as highly-desired within a culture or society. The ability to purchase or finance a luxury item is directly proportionate to ones’ income or assets. In other words, as people move into higher income brackets they are more able and more likely to purchase more expensive luxury goods.
Luxury items are also known as “positional goods” because they signal that the owner has achieved a certain position or status within society to be able to afford them.
BREAKING DOWN ‘Luxury Item’
Certain luxury items may be subjected to a specific tax or “luxury tax.” For example large or expensive recreational boats or automobiles can be subject to a federal tax. The U.S. levied a luxury tax on certain automobiles in the 1990s but ended the tax in 2003. Luxury taxes are considered progressive because they typically only affect people with high net wealth or income.