July 7, 2011 By Eric Lichtblau
WASHINGTON – President Obama used to like corporate jets. As a senator in 2005, he crisscrossed the country in them nine times to attend fund-raisers and other events, reimbursing the corporate jet owners at first-class rates.
But Mr. Obama said he soon grew uncomfortable with the high-flying perk in his Senate days and started flying commercial. Now, as the president squares off with Republicans over the debt ceiling, he and fellow Democrats are looking to turn tax breaks for corporate jet owners – and yacht owners, too – into a potent political symbol of a tax system that Democrats say tilts toward the very rich.
Mr. Obama and Democratic leaders have made a rollback of tax breaks for corporate jets a frequent talking point in recent days in their efforts to persuade Republicans to agree to raise taxes as well as make spending cuts as part of the budget talks. But the drumbeat from Democrats has set off a counterattack from a small but powerful group of jet manufacturers and users, who have contributed millions of dollars over the years to lawmakers from both parties.
The debate is less about dollars and cents than it is about political imagery and a bit of class warfare. Ending special deductions for the depreciation of corporate jets would raise an estimated $3 billion in tax revenues – or, as the jet manufacturers point out, a fraction of one percent of the deficit the country is facing.
“The president is vilifying an entire industry,” said Dan Hubbard, a senior vice president for the National Business Aviation Association, which represents 8,000 companies that use private planes. “This is an attempt to score some cheap political points on the back of an industry that employs 1.2 million people.”
Jet industry officials, in buttonholing sympathetic lawmakers and organizing an e-mail campaign in the past week to maintain the tax break, are making the case that raising taxes on jet ownership would inevitably cut jet production, endanger jobs and affect ordinary Americans.
Mr. Hubbard said it would be the Montana real estate broker, who relies on a plane to travel the state’s vast expanses, or the employee in Schenectady, N.Y., who makes jet upholstery, who would ultimately be harmed, not the jet-setting corporate executive that Democrats have focused on.
He said the industry was surprised by Mr. Obama’s focus on private jets – the president mentioned the issue six times in a news conference last week – because it was Mr. Obama who had helped create an expanded deduction last year for the industry as a way of creating jobs.
In fighting to hold on to the tax break, the industry has some major backers, with executives from Wal-Mart, J.P. Morgan and many other Fortune 500 companies all flying private jets.
Warren E. Buffett, the Omaha investor who leads Berkshire Hathaway, bought a plane-sharing business, now known as NetJets, after using its planes for a number of years. Asked in a CNBC interview on Thursday about tax breaks for corporate jets, Mr. Buffett declined to take a direct position but said that “I don’t really see where a business aircraft is different” from other types of capital investments in how they should be taxed.
Political action committees and employees for jet manufacturers and related aviation sectors accounted for more than $6.6 million in political contributions to federal lawmakers in the last decade, according to an analysis by MapLight, a nonprofit group that analyzes campaign finance data.
But while Republicans accuse the White House of distorting the fiscal basis of the tax break for jets, they acknowledge that the issue carries a big political wallop in tough economic times.
“President Obama and our colleagues on the other side of the aisle are obviously using poll-tested rhetoric about only raising taxes on millionaires and billionaires and corporate jets,” said Senator Jon Kyl, Republican of Arizona. “That sounds good. They want ordinary Americans to believe they will not be affected by the president’s tax-increase proposals.”
Indeed, the embarrassing image of executives from the Big Three automakers flying to Washington in private jets in 2008 to ask for private bailout money looms large in the current debate. Democrats figure that trillion-dollar deficits are a tough concept for Americans to get their arms around. Tax breaks for corporate jet fliers and yacht owners, they say, are much easier. “Yes, believe it or not, Uncle Sam subsidizes the purchase of sprawling, luxurious, 72-foot Viking yachts,” Senator Charles E. Schumer, Democrat of New York, said on the Senate floor in arguing to close what he sees as tax loopholes for jet and yacht owners. “As long as your yacht has a place to sleep and a place to – how shall I put it – relieve yourself, you can classify it as your ‘second home’ and claim the mortgage interest deduction.”
The Democrats’ scrutiny of tax breaks for jets, yachts and other luxury items is a calculated strategy meant to force the Republicans to give ground in their demands for big spending cuts in areas like Medicare, said Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee.
“This was a very clear symbol of the fact that Republicans are willing to protect big-money interests and loopholes at any cost,” Mr. Van Hollen said. “If Republicans are willing to dig in to protect tax breaks for corporate jets, they’re clearly not serious about deficit reduction.”
Source: THE NEW YORK TIMES