April 8, 2013
By Susan Crabtree
Over the past two years of Washington budget battles and now with the “sequester” cuts taking effect in earnest, President Obama repeatedly has called for closing tax breaks on corporate jets as a way to help solve the nation’s budget woes.
In the face of impending cuts, White House spokesman Jay Carney again last week accused Republicans of valuing corporate jet owners over jobs and a better economy.
Pointing to economic estimates, Mr. Carney said the sequester would cost roughly a half-percentage-point in economic growth and 750,000 jobs — a hit that Republicans are forcing the nation to take so they can protect the wealthy, according to the president’s press secretary.
“Republicans in the House thought that was a better outcome — reduced economic growth, reduced job creation — than asking folks to give up special tax breaks — corporate jet owners, wealthy individuals who get special deductions,” he said.
In reality, eliminating the tax break for corporate jet owners is far more complicated than the White House talking points on the topic, and the revenue produced by ending the tax break would amount to only a drop in the nation’s deficit-reduction bucket.
For one thing, the so-called tax loophole the White House likes to bash applies to all aircraft except commercial airlines, including privately owned Cessnas and helicopters, not just corporate jets.
But more importantly when it comes to budget matters, the tax benefit that applies to these aircraft is only slight. Instead of the seven years commercial airlines are allowed to depreciate their aircraft, the tax code allows private aircraft owners to depreciate the planes over five years.
The benefit has been a part of the tax code since 1987 and stopping it would yield just $3 billion in revenue over the course of 10 years, according to Congress’ Joint Committee on Taxation.
“In all my time in Washington, never has so much been said and written about on something so trivial,” said Ken Kies, a veteran tax lobbyist at the Federal Policy Group. “It’s not real money. … What really makes it trivial with interest rates as low as they are, at 3 percent, the difference between [depreciating five years versus seven years] is so minimal that it’s economically meaningless.”
Even those who believe the tax break for noncommercial aircraft should be ended say the administration needs to stop singling out corporate jets and talk about allowances for business depreciation as a whole.
“I would suggest that Congress and the White House follow the logic to its conclusion and really look at all of these depreciation breaks,” said Steve Wamhoff, legislative director for Citizens for Tax Justice. “Anytime you let companies write off the costs of equipment purchases faster than that equipment wears out, you are giving them a subsidy.”
But going after all business depreciation would contradict Mr. Obama’s own economic stimulus policies.
After all, Mr. Obama extended and expanded similar depreciation policies as a way to encourage capital investments for millions of businesses in the 2009 stimulus bill, and the president and Congress agreed to do so again in the recent “fiscal cliff” deal that passed early in the new year.
Even labor unions have taken issue with Mr. Obama’s continued attacks on the private-aircraft industry, which support $1.2 million in jobs and is responsible for $4.8 billion in exports annually, according to the General Aviation Manufacturers Association. One-third of global general aircraft sales were American-made aircraft sold outside the U.S.