President Obama reopened barely healed wounds and drew an outcry of protests from the general aviation community and elected officials last week when he pushed for increased taxes on millionaires, billionaires and corporate aircraft users, saying their tax breaks could compromise health, education and safety programs.
“If we choose to keep a tax break for corporate jet owners, if we choose to keep tax breaks for oil and gas companies that are making hundreds of billions of dollars, then that means we’ve got to cut some kids off from getting a college scholarship,” Obama said in a June 29 press conference, adding, “That means we’ve got to stop funding certain grants for medical research. That means that food safety may be compromised. That means that Medicare has to bear a greater part of the burden. Those are the choices we have to make.”
His remarks were reminiscent of criticism levied by lawmakers and the administration alike in late 2008 and early 2009, when the general aviation industry plunged into a deep recession. The remarks at the time compounded industry economic woes, encouraging corporations to hide their aircraft in hangars, stop flying and stop buying. As a result, GA manufacturers laid off thousands of workers, andis still half the company it was with less than one-quarter of the order book it had in early 2008.
The most recent comments were spurred by a debate over whether to change depreciation schedules for corporate aircraft as part of overall federal deficit-reduction efforts. The corporate aircraft taxes are considered one of the contentious items in the overall negotiations to reduce the deficit, although the top Republican on the Senate Budget Committee, Sen. Jeff Sessions (Ala.), has indicated that there is room to compromise. “I would have to look at that—but I’m not sure I think corporate jets are so valuable that they’d need a tax break,” says Sessions, adding, “We could consider that.”
In his press conference last week, Obama cited corporate aircraft taxes on numerous occasions, saying, “I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up a tax break that no other business enjoys.” He adds that if Republican lawmakers were asked whether they are “willing to compromise their kids’ safety so that some corporate jet owner continues to get a tax break ... I’m pretty sure what the answer would be.”
Within hours of the press conference, at least nine aviation associations—ranging from the manufacturers, service companies, operators, a union and the Alliance for Aviation Across America (which represents 5,700 aviation, government, local and business groups)—had come out condemning Obama’s remarks. Joining the chorus were lawmakers on Capitol Hill, as well as the mayor of Wichita, home to numerous general aviation businesses and original equipment manufacturers.
Vilify And Mischaracherize
“The President has inexplicably chosen to vilify and mischaracterize business aviation—an industry that is critical for citizens, companies and communities across the U.S., and one that can play a central role in the economic recovery he says he wants to promote,” National Business Aviation Association President and CEO Ed Bolen said after the press conference.
Bolen notes that the President backed accelerated depreciation schedules nine months ago as a means to stimulate jobs. “Now he seems to want to reverse course and push ahead with punitive treatment for general aviation. Equally alarming, the President’s disparaging remarks reflect a total lack of understanding—or a complete disregard—for general aviation in the U.S.”
General aviation employs 1.2 million people and generates $150 billion in revenues each year, he says. “The Obama proposal is bad policy and cynical politics. We will oppose the idea vigorously, and we call on Congress to reject it.”
Aerospace Industries Association President and CEO Marion Blakey, meanwhile, told the Aero Club of Washington meeting on June 30, “In October, Mr. Obama endorsed bonus depreciation as a way to incentivize business investment. On Tuesday, he praised Alcoa workers for making the wings of Air Force One, the biggest corporate jet in America, by the way. Then the very next day, he says he wants to kill any tax incentive to buy the business jets that have Alcoa products in them. It’s baffling and disturbing.”
The General Aviation Manufacturers Association (GAMA) and International Association of Machinists and Aerospace Workers (IAM) wrote Obama on June 29, also saying they “are perplexed over recent comments and actions questioning the value of corporate aircraft use and proposing tax changes that would negatively impact the entire general aviation industry.”
The IAM and GAMA add that criticism levied against corporate jet use in 2008 “exacerbated the challenges facing our industry, which led to depressed new-aircraft sales and jeopardized very good, high-paying jobs throughout the U.S.” That criticism contributed to the loss of more than 20,000 IAM jobs, they say.
Wichita Mayor Carl Brewer, who has been on a two-year quest to lure the President to Wichita to get a better understanding of the industry there, reiterated his invitation for Obama to visit Kansas. “I am deeply concerned about the President’s comments about general aviation,” Brewer says. “ Particularly during a time when many Americans are struggling to make ends meet, we cannot afford additional tax burdens and unnecessary mischaracterizations about the general aviation industry, which drives thousands of jobs, over $7 billion in economic impact here in Kansas alone, and over $1.2 billion in job payroll nationally.”
Increased taxes on the industry could place more GA jobs and aviation businesses at risk, says Brewer. “Undercutting the industry with additional tax burdens at this critical time in our economic recovery is not sound strategy,” he says.
Senate General Aviation Caucus co-Chair Mike Johanns (R-Neb.) agrees, saying, “It may be good politics at the White House to demonize the general aviation industry, but it is unwise.”
He calls the remarks “class warfare” and says, “Painting the picture of business executives on a corporate jet seems to present too easy a target for the President to score political points, but the reality is that good people lose jobs when we play politics with an entire industry.”
National Air Transportation Association President James Coyne echoes those sentiments, saying, “It is perplexing why the President continues to bash an industry that is responsible for thousands of manufacturing, maintenance and service jobs. The President’s comments before a national audience could weaken consumer confidence in general aviation utilization at a time when economic indicators are demonstrating that the community is finally starting to recover from the recession.”
“Imposing higher taxes on GA aircraft by lengthening depreciation schedules is inconsistent ... with sound economic principals,” adds Aircraft Owners and Pilots Association President and CEO Craig Fuller.