June 29, 2011 By Robert Frank
President Obama has a new term for the people he wants to tax more: jet owners.
In his news conference today, the president said: “I think it’s only fair to ask an oil company or a corporate jet owner that’s doing so well to give up that tax breakÉ.I don’t think that’s real radical.”
Asking private-jet owners to give up tax breaks may not be that radical. And it probably would be supported by the vast majority of the nonjet-owning voters.
The problem is that most of the people that would be subject to the higher taxes the president wants aren’t likely to be private-jet owners. Someone earning $250,000 a year – among those scheduled for a tax increase in 2012 – is unlikely to afford a jet – or even a few charter trips on a jet.
For those, like the president, who may not be well-versed in Jetonomics, here are some of the basics. The numbers come courtesy of Jay Duckson at Central Business jets:
COST OF BUYING A JET
New Citation CJ (entry level jet) – $5 million. Annual operating costs (fuel, hangar space, pilots) about $500,000.
Cheapest Used Jet – $100,000 to $500,000. Annual operating costs (hangar, pilots, mechanics, fuel) about $1 million a year.
COSTS OF CHARTERING A JET
Typical charter – $3,000 an hour
It is possible, of course, that someone earning $250,000 a year might spend 5% to 10% of their annual income on a single flight by chartering, in which case we could call them “corporate-jet fliers.” But it is unlikely. Even more unlikely is someone earning $250,000 a year paying $500,000 to $1 million a year to operate a jet – even if they received it free.
According to Mr. Duckson and others, most of those who own their own jets have net worths of $100 million or more and earn more than $10 million a year – minimum.
The President may be right that is fair to tax private-jet owners. He may even be right that it is fair to raise taxes on those earnings more than $250,000 a year. But the only kind of jet owned by people earning $250,000 a year would be the kind that sits on your desk.
How rich do you think you have to be to own a jet?
ADDITIONAL NOTE: While Obama was referring in part to the Democratic effort to close a tax loophole for jet owners, known as “accelerate depreciation,” the loophole would raise only $3 billion over the next decade. The larger point is that his “jet owner” comment blurs the lines between super-rich jet owners and the far lesser rich, whose whose taxes would go up under the Democrats plan.
Source: WSJ BLOG