As the debt ceiling talks continued late last week, changes in depreciation schedules for corporate aircraft remained on the table, but a series of possible new tax proposals—including user fees—surfaced as well. A proposal floated last week apparently includes potential $27 billion in revenue raisers that would derive from aviation and the Pension Benefit Guaranty Corp.
Specifics on these fees were sketchy, but National Business Aviation Association President and CEO Ed Bolen says, “What is beginning to emerge is a lot of discussions of user fees. It’s a huge concern.”
Whether such fees gain traction remains to be seen—since Republicans have been adamantly opposed to revenue raisers—but Bolen says, “We’re taking it very seriously.” He adds that it is rare to see President Obama and Congress have daily public briefings as they have on the debt-ceiling talks. “This is a very significant point in time in Washington,” he says.
Particularly troubling, he says, is that user fees have been fully vetted by Congress and “after lots of study, lots of debate and lots of examination,” lawmakers have opted to shelve them. But aviation policy is not driving the debate this time, Bolen notes, macroeconomic issues are.
“We know when parties analyze user fees, they have rejected them. It is an enormous concern to see a bad idea revived by a macroeconomic issue,” Bolen says. Those decisions are being debated by a small, closed circle, he notes. “We hope what would emerge is something that is good policy.”
The Air Transport Association, fearing the revenue raisers also could include increased passenger ticket taxes, immediately voiced its objections last week. “The industry already pays more than its fair share of taxes—more than alcohol and tobacco, products that are taxed at levels to discourage their use,” ATA President and CEO Nicholas E. Calio says.
Also apparently on the bargaining table has been a change in the depreciation schedule for corporate aircraft from five years to seven years, matching that of commercial airliners. Congress has estimated that extending the depreciation schedule could raise about $2 billion-$3 billion over 10 years. But business aviation advocates question whether those numbers are more of an accounting function, since the amount of depreciation would not change, only the length of time.
Several reports also have questioned why Congress and the administration would single this out as one of the key issues in the talks when the amount raised is a mere fraction of the multi-trillion-dollar deficit.
At a press conference earlier in the week, Obama provided a little more detail on the timing, saying the administration is pushing for tax changes beginning in 2013.
This means the 100% depreciation benefits that Congress passed last fall would remain in effect for the time being.
Although a number of possible aviation taxes have been put into play, Obama continues to mention corporate jet tax breaks as a key theme. On Friday, he said his plan is to make sure “corporate jet owners aren’t getting unnecessary tax breaks” and, during his July 11 press conference, he said, “What we have talked about is that starting in 2013, that we have gotten rid of some of these egregious loopholes that are benefiting corporate jet owners or oil companies at a time where they’re making billions of dollars of profits.”
He acknowledges concerns of “job-killing tax increases when the economy is weak,” but reiterates “nobody is looking to raise taxes right now.”
His remarks continue to draw protests. On July 11, 10 mayors representing six states wrote the president to express “our deep concern regarding your recent comments about general aviation, which not only mischaracterized these aircraft and their crucial importance for our economy, but suggested an increased tax burden for general aviation operators.”
The mayors reminded the president that general aviation brings $150 billion to the economy and expressed concerns about the repercussions that recent statements could have on a struggling industry.
“The vast majority of businesses and organizations that own and utilize general aviation are not wealthy CEOs,” they say. “Rather, they are small to midsized businesses and organizations that rely on these aircraft to reach far-off plants and customers, serve rural markets without access to commercial aviation, or deliver medical care and other services.”
Signing the letter were Mayors Carl Brewer (Wichita), Mary Ann Maynard (Stuttgart, Ark.), Steve Van Oort (Ankeny, Iowa), Matt Bemrich (Fort Dodge, Iowa), Dick Kirchoff (Le Mars, Iowa), Robert C. Willey (Easton, Md.), Dave McGirr (Huron, S.D.), Dave Hahn (Wall, S.D.), Margaret Larson (Arlington, Wash.) and Bob Goedde (Chelan, Wash.).