Key Democrats are supporting an effort to lengthen business aircraft depreciation schedules, but Republicans in the House and Senate are resisting, with one calling the push a “poll-tested gimmick.”
The White House and Senate Democrats are hoping to close a series of tax loopholes to raise revenues as part of a plan to delay spending cuts that would come with sequestration.
White House Press Secretary Jay Carney told reporters last week that “It can’t be we’ll let sequester kick in because we insist that tax loopholes remain where they are for corporate jet owners.” And on Feb. 5, he referred to the depreciation schedules as “subsidies to corporate jet owners.” Carney notes that President Barack Obama’s budget plan aims to close “loopholes that give tax advantages to the wealthy and to corporations that average Americans and average businesses don’t have.”
Senate Majority Leader Harry Reid (D-Nev.) also says that Washington should go after tax loopholes. In an interview on Feb. 3 with ABC, Reid cites corporate jets as one of those loopholes and says, “There are all kinds of things that are low-hanging fruit. We believe the rich should contribute.”
But despite apparent support from top Democrat leaders, a tax loophole proposal that Sen. Carl Levin (D-Mich.) has floated does not include business aircraft depreciation schedules – at least not at the moment. This is notable because Levin was among lawmakers who, during the height of the economic downturn, criticized a financially-troubled Citibank for its plan to purchase aFalcon 7X. Citibank canceled the order.
The concept is also being met with staunch resistance from key Republicans. Senate Minority Leader Mitch McConnell (R-Ky.) calls the proposal a “poll-tested gimmick” that is not a real solution. The corporate jet proposal, he says, “wouldn’t raise enough revenue to offset one week of the decade-long sequester it’s meant to offset. One week.”
But the proposal would have negative repercussions on growth and jobs, he adds. “We don’t have to look too far into the past to see just how destructive those consequences can be,” he says, pointing to the luxury tax adopted in the 1990s on yachts and certain aircraft. “It was a total failure,” McConnell says. “Not only did it destroy 30,000 jobs in the boating industry alone. From a revenue perspective, the government actually spent more in unemployment benefits and in lost taxes than it was able to raise through the luxury tax. So why are they proposing to go down this same sorry road again?”
In the House, Rep. Mike Pompeo (R-Kan.) this week wrote a letter to colleagues arguing that there is no such corporate jet loophole and that the claim is simply a “political sound bite.”
Pompeo notes that the five-year depreciation schedule has been in place for more than 25 years and numerous assets have five-year schedules, while others have a three-year schedule.
He acknowledges airliners have seven-year schedules, but says, “It would make little sense for an’ to have the same depreciation schedule as a farmer’s Air Tractor.”
General aviation advocates have also voiced opposition to the plan. “Their rhetoric is wrong and all it does is hurt general aviation companies and workers across this country,” says General Aviation Manufacturers Association President and CEO Pete Bunce.
“As our country pursues this critical policy objective, it is important to ensure that the proposals we consider are based on reality rather than rhetoric,” adds National Business Aviation Association President and CEO Ed Bolen. “Unfortunately, in the course of the debate over the debt, the White House has recently focused on misleading statements related to depreciation schedules for business aircraft.”
“Aircraft Owners and Pilots Association (AOPA) is very disappointed in the Obama Administration’s endless attempts to lengthen the depreciation schedule for business aircraft,” agrees AOPA President and CEO Craig Fuller. “At a time of widespread concern over job creation in this country, we feel it is short-sighted to put further financial burdens on an industry that contributes positively to our nation’s balance of trade, and one that supports highly skilled, good paying jobs.”