In Defense of Corporate Jets
Corporate jets are the new buggaboo of class warfare rhetoric. We are told, with the proper frothing-at-the-mouth indignation that only the politically correct can muster, that owners of corporate jets should not enjoy tax benefits for that capital asset. For that matter, whether owners of corporate jets should even be allowed to enjoy breathing seems open to question.
What everyone seems to forget in their righteous fury is that we have been here before. In 1993, President Clinton used similar rhetoric to trash owners of luxury yachts, imposing a substantial surtax on their purchase. The idea was exactly the same as now: people who buy these things are rich and don’t “deserve” tax breaks.
Then, as now, moral preening trumped practical realities. The surtax on yachts failed to produce new revenue. What it did do is extinguish the yacht-building and -maintaining industries, as wealthy yacht owners simply decided it wasn’t worth it or else moved their yachting activities to other countries. The cost of thoughtless class warfare game-playing was thousands of jobs.
Railing against corporate jets threatens the same mistakes. Whether or not we “like” the “rich people” who ride on corporate jets (and presumably Al Gore and other rich people who just happen to also lean leftward politically are exempted from the hatred of corporate jet owners), the fact is that the manufacture and maintenance of corporate jets provides thousands of jobs. At a time when unemployment is stubbornly high, is it really worth it to wipe out those jobs just to stick it to “rich people”?
I really wonder whether some progressives’ economic priorities have anything to do with actually improving the economy or whether it is just about trying hating “rich people” regardless of the actual costs to real workers.
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I don’t get any subsidies for buying & maintaining a car, why should those people get any subsidies for buying & maintaining a jet?
Besides, those are the same people who have been financing the Tea-Baggers and getting them to rail against “Union benefits & Wages”, if class warfare can go top-down, why should it not go the other way?
I don’t think people are going to move their corporate jetting activities to other countries.
DQ, I agree that subsidies are not justified. Please note that the title is not “In Defense of Corporate Jet Subsidies”.
But we’re not talking about subsidies, we are talking about capital gains tax benefits. And vehicles owned by businesses ARE treated as capital assets, with the resulting tax benefits.
In the end, I think the analysis should relate to what is the best economic and fiscal policy in a practical sense rather than relating to the emotional hatred (yes, hatred) that you seem to prioritize in your comment. I think vengeance is a very poor basis for economic policy, as Pol Pot and others of that ilk demonstrated.
So Logan
You saying these guys can’t take first class or coach and avoid this whole capital assets thingy? Why should they, they get a big fat deduction that servers only their interests.
And those nice 75 foot yachts, they really deserve those tax breaks too. and tax breaks on second and third houses, they really deserve those too.
logan, you dig your hole with the golden shovel of elitism.
“I don’t think people are going to move their corporate jetting activities to other countries.”
Actually, it would be fairly simple for them to simply title them in other countries and move the maintenance there. Jet maintenance functions are highly mobile because the asset can, you know, move around pretty quickly. And for large multinational corporations, it is a simple matter to simply retitle assets in another country.
“You saying these guys can’t take first class or coach and avoid this whole capital assets thingy? Why should they, they get a big fat deduction that servers only their interests.”
Wrong. It also serves the interests of people who make a living building and maintaining small jets. Those people lose their jobs when “the rich” are forced to switch forms of elite transport just to satisfy a purely emotional urge of class warriors.
The taxation of yachts was a similar case. It made for great feelings of vengeance, but thousands of jobs were lost.
But as long as you all feel all smug, I guess it was worth it, right?
Maybe some of the “elitism” is on your side — the elitism of people who can bash “the rich” without being the ones who lose jobs as a result.
Bring back asbestos!! Just think of the jobs it will create.
As soon as you start a business that uses your car for business purposes DQ, you are more than welcome to either treat it as an asset or to deduct a mileage allowance.
Several aspects are getting all jumbled together here. The “tax break” Obama is talking about is allowing depreciating a corporate jet over 5 years instead of 7 years. As far as I can tell, that’s it. If he wants to reverse that then more power to him but in the big picture it won’t amount to a hill of beans.
On the yachts, I’m going by memory here but I believe that was a luxury tax on new yachts and had nothing to do with tax breaks or depreciating them for business (as Hemm implies). Logan is right that tax ultimately ending up hurting the workers that produced the yachts, but that is not a reason to change the depreciation schedule of jets one way or the other. People should bear in mind though that the reason the depreciation schedule was accelerated was that the government WANTED companies to go buy jets as part of the economic stimulus. It is inconsistent to complain now that companies essentially did what the government intended.
On corporate jets as a legitimate business expense, personally I think they are more of a perk than a necessity, but if politicians can justify flying on taxpayer-provided jets I would think CEOs could justify the use of jets on company business.
Rather than the corporate jets, I’d be more cynical about Travel and Entertainment expenses. (In some countries, bribery is a legitimate business expense, incidentally.) If companies can write off the cost of more ludicrous, excessive, unnecessary expenses (though we all know every cent will be claimed to be an essential expense), what about, as part of tax reform, letting people deduct their commuting costs? (Someday that might even include the acquisition and operating costs of vehicles primarily driven for commuting.)
We have (or should have) long known about “business” cell phones (and for that matter, vehicles) used for personal matters.
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Please think back to the appearance of the leadership of the Detroit Big Three in Washington to justify an enormous bailout of their companies. They committed atrocious public relations by flying in private jets (which was in the news constantly when they did this). There were reasons given eventually to support the use of the jets (which makes them legitimate business assets and expenses to acquire and operate them). In addition to the long-obvious “time savings at executive-compensation values” position there was an additional one, of security for the top executives.
The luxury tax was enacted in late 1990. Don’t any of you remember that this happened during the first and only term of George H. W. Bush, and this was one of the glaring irritations to the public that eventually made it truly Bush’s only term?
Cayman Islands Aviation — I like it.
DaGoat: You probably realize that the Depreciation Game could be ended immediately if capital asset purchases were fully deductible at the time of purchase. There are other examples of where making the tax laws much more simple would be good, but this one is pertinent to the corporate jet and other large-capital-expense issue.
(Or if business takes out loans to buy or build Big and Expensive Stuff, just allow the principal to be written off completely at the time the loan is made. It’s more controversial if interest should also be deductible.)
There are arguments in favor of depreciation, but ending depreciation and making purchases or construction fully deductible at the time the expenses happen is a possibility.
“The taxation of yachts was a similar case. It made for great feelings of vengeance, but thousands of jobs were lost.”
So you’ll agree that symbolism and semiotics should stay out of serious economic decisions that should be judged depending on cost-benefit analyses and NPV-predictions? It’ll be interesting to see if you’ll be able to be consistent on that, as you defend the GOP during its continuing march towards being totally reliant on metaphysics.
Also, just how disappointed are you in David Brooks for not being his obsessively equivocating, mealy-mouthed and simpering self?
Absalon,
I will just continue to call it as I see it, including condemning the Republicans with regard to their irresponsible approach to the debt ceiling. In fact, you should go back and read those posts before you
tell more liesmake more errors about what I do or don’t believe.Also, some time you should try responding without trying to change the subject back to your side’s tired and drastically over-represented anti-Republican talking points.
DaGoat, I’m mostly referring to the broader “rich-bashing” discourse (many prominent examples on this thread or pretty much any posting by any progressive these days) rather than just the very limited policy proposal that is currently on the table.
If these folks have their way, millions of workers would be out of work in pursuit of the goal of punishing “the rich.” And I think that is a very dangerous mentality. I honestly wonder which side of Pol Pot’s crusade some of these people would have been on.
And who are “the rich”? There are endless arguments about that, as well as warnings by the prescient about how that word’s definition will get revised downward, the more desperate and greedy we find government to be (more envious and greedy than the class warriors)
(Regarding the WSJ depiction of taxable income and lefty gripes)
http://www.brendan-nyhan.com/blog/2011/05/the-use-and-abuse-of-bar-graphs.html