Bizav and Obama: Time for a Reality Check

President Obama has proposed eliminating a tax break for business jet buyers.
President Obama has proposed eliminating a tax break for business jet buyers.
Thursday, February 28, 2013 - 4:30pm

If I had to sum up the benefits of business jets in just one word, I might pick “convenience.” According to Wikipedia, “convenient procedures, products and services are those intended to increase ease in accessibility, save resources (such as time, effort and energy) and decrease frustration.”

That’s exactly what our magazine has long argued: that for companies that can afford them, business jets are well worth considering because they can provide better accessibility to more places and save effort, energy and especially time. Other bizjet advocates have been saying the same thing for years.

This is also what President Obama said in an interview on February 20.

So how did the industry respond? A press release from the National Business Aviation Association said, “An assertion was offered by the White House that the only reason American companies use business aircraft is because ‘it’s extremely convenient and they can afford it.’” This, said the NBAA, is “dismissive,” “a misrepresentation” and “a caricature of business aviation that is at odds with reality.”

First, Obama never used the word “only”—the NBAA added that, apparently for effect. Second, the president’s statement is true.

So why is the industry upset? Undoubtedly because the president also suggested, as he has on previous occasions, that it’s time to talk about extending the depreciation period for tax purposes for many business jets from five years to seven. These buyers “don’t need an extra tax break, especially at a time when we’re trying to reduce the deficit,” Obama said. “Something’s gotta give.”

Mind you, the President recently signed a bill that extended through 2013 (and 2014, in some cases) a rule that allows bizjet buyers to write off more than half their purchase cost during the first year. In the February 20 interview, also, he said, “We want to give more tax breaks to all the aviation companies in Kansas, so that they are hiring here and producing here.” But for bizav leaders, that statement and the extension of bonus depreciation apparently weren't enough to outweigh the comment about extending depreciation periods for buyers, which according to them, seemingly suggested that the president was advocating some sort of aviation industry apocalypse.

Helicopter Association International president Matt Zuccaro, for example, called the President’s comment “unbelievable” and “seemingly aimed at ending general aviation.” Zuccaro added that he had no problem with the President flying on Air Force One, but “is it too much to ask that private individuals and corporations also be allowed to realize the benefits of general aviation for their business activities?”

General Aviation Manufacturers Association CEO Pete Bunce responded similarly when White House spokesman Jay Carney noted that the tax proposal involved “difficult choices.” Bunce called that statement “totally outrageous” and demanded an apology, adding: “It’s completely offensive to refer to hard-working Americans [in the aviation industry who could lose their jobs] as ‘difficult choices.’ This Administration should stop the sound bites and political games.”

As I’ve written previously, the President may indeed be playing a bit of a political game, based on the number of times he has mentioned corporate jets—a term the general public has come to associate with wealth and excess. But it seems to me that the bizav industry is playing a political game here, too—and it’s the same one being played by leaders in virtually every other American industry, none of whom appear to believe their members should pay higher taxes, either. They all say that their businesses contribute greatly to the economy and that making them pay more would not be good for America, so the money needed to reduce the deficit and pay down the national debt should come from somewhere else.

Be that as it may, adding two years to the depreciation schedule for business-jet buyers wouldn’t exactly make a huge difference in the nation’s economy, but it probably also wouldn’t hurt the industry nearly as much as its leaders suggest. BJT columnist Jeff Wieand, a member of the NBAA’s Tax Committee, doesn't believe this change would have a significant impact on jet sales, nor for that matter, does he see bonus depreciation as a major factor in boosting sales. As he noted in our pages two years ago, bonus depreciation doesn't apply to used aircraft and it doesn't help the U.S. aviation industry when it is applied to the purchase of the many new business airplanes that are manufactured outside the U.S. Moreover, it merely accelerates a tax benefit rather than creates a new one; it is of value only to companies that are already doing well and have profits to shelter; and it could actually lead to higher aircraft prices.

Meanwhile, as economist and New York Times columnist Paul Krugman pointed out last July, corporations already have plenty of cash they’re not using. As such, he wrote, claims “that a corporate tax holiday would create jobs, or that ending the tax break for corporate jets would destroy jobs, are nonsense.”

So maybe we should all take a deep breath and relax. Corporate jets represent a valuable business tool. And if Congress tinkers with the depreciation rules for new-jet purchases, that tool will still be available and the bizav industry will not die, all suggestions to the contrary notwithstanding. The business aviation associations have a case to make, but they could make it better and more credibly if they toned down the rhetoric.

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Your Letters

What our readers had to say

BIZAV AND OBAMA

Jeff Burger’s opinion piece [“Bizav and Obama: Time for a Reality Check,” June/July 2013] is correct in noting that business aviation is a critical tool for thousands of companies. Unfortunately, President Obama and his spokespeople have often made statements—in major speeches, press conferences and other appearances—that seem dismissive about the importance of business aviation and reflect misperceptions about the industry. The fact is, business aviation is one of the nation’s “good news” stories: the industry supports 1.2 million jobs, strengthens America’s balance of trade, helps companies of all sizes compete and succeed in a global marketplace and provides a transportation lifeline that bolsters the economies of communities and towns nationwide. The entrepreneurs and companies using business aviation can be, and want to be, part of America’s economic recovery. Given the President’s repeated emphasis on the importance of an economic rebound, it’s curious that he would advance what most people I talk to consider a disparaging view of this essential industry.

Ed Bolen, President and CEO

National Business Aviation Association

Washington, D.C.


The $100 flat fee is problematic. On a Gulfstream that operates for $5,000 an hour it is peanuts, but what about a single-engine turboprop operating at $600 an hour? Moreover, [to avoid the fee] we will fly VFR and cause more headaches or collisions because we are not in the system. The fee will, without a doubt, depreciate safety.

Also, who collects it? Who accounts for it? Do we need a new department with millions of dollars in personnel to wrestle with it? The government will spend more than it takes in. We already have the fairest, simplest system going in the fuel taxes we pay—if the plane goes farther or is bigger it burns more fuel and contributes more to the government coffers. Your article asked, “Is anyone really going to get out of the game or even cut back on flying because the price tag on a trip increased by $100?” The answer is yes.

David L. Metzler, President, Carlisle Carrier Corp.

Mechanicsburg, Pennsylvania

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nick
on March 19, 2013 - 11:27am

lets face the facts, there are two types of fools that voted for this clown - his entertainment friends who make tons of money but don't share it with anyone ( execpt to buy access) and those that live on the govenment tit. His firends with corporate jets excuse his comments because they don't use them for business, and the rest of the fools dont have a job so the element of time is only a concept they neither can understand or appreicate. You will note he and his fmaily dont mind using private aircraft to the tune of millions of dollars for their vacations... we need to send this two faced coward back to whereever it was that he was really born, before he finishes the job of destroying this country.

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Tom
on March 20, 2013 - 2:41pm

Regardless of your desire to promote business/general aviation, your political affiliation or your feelings on taxes and rates - the reality is SIFL calculations are a tremendous loophole for wealthy individuals that fly privately. Focusing on bonus depreciation is a bit of false argument for both sides. SIFL and other similar charge-back benefits written into the IRS code (and FAA regs)is a great place to start for common sense reform.

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Johnny Rotton
on March 19, 2013 - 11:29am

Listen, if you can afford the jet, you can afford the tax. Don't like it, go commercial.

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Daniel Cretsinger
on March 19, 2013 - 11:49am

Clearly Jeff Burger voted for Obama. Why doesn't he or others like him, bring to question the exorbitant cost that we as tax payers are paying for his travels around the country and world. If he (and his family) would tone down their ridiculous travel behavior, we could save billion$ and get our economy back on track by allowing the people that really pay for this way of life in a free enterprise to use their planes as the tools they are and grow their businesses...thereby creating jobs. Maybe the president should look elsewhere when it comes to cutting back...like entitlements!!!
I for one hope that people that read Jeff Burger's article take offense to it as I have and stop any support to Business Jet Traveler.

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Jeff
on March 19, 2013 - 12:11pm

I finally had some hope when business aviation leaders got some backbone to call out this fraud of a president for who he is. But, there's always the ass-kissers like Mr. Burger who contort themselves to apologize for the worst president in my lifetime. Obama is an utter failure as a leader, a divider who plays one group against another. The economy continues to languish under his lack of leadership, mainly because he has pitted the so-called "have-nots" against the "haves". Problem is, whether you like it or not, the haves create the jobs for the have-nots. Fools like Johnny Rotten think the wealthy need to "pay their fair share" but the reality is that if the money goes to the government in more taxes, there's less to spend on hiring. Obama has successfully demonized the rich, but it's really none of my damn business if someone got wealthy by hard work and ingenuity. We should learn from them, not find ways to punish them. When Americans finally quit putting out their palms for a hand-out and quit seeing Obama and his ilk as their sugar daddies, we might finally bring this country back to prominence. Right now, we're spiraling toward a historic has-been.

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Ed
on March 19, 2013 - 12:52pm

Mr Burger is obviously another shameful Obama supporter. Like every other alleged journalist in this country, Obama keeps getting a pass. He is never asked tough questions, or even challenged about the things he says. There is never a follow up question to clarify what he is really saying.

To quote Jay Carney....you've got to be kidding....He's the biggest two faced liar on the planet.

Make no mistake, Obama is destroying our nation, our jobs, and he wants to destroy this industry. You are naive if you think other wise.

Mr Burger if business aviation goes away so will your job. Wake up.

By the way Johnny Rotten, There is nothing in the tax code that says you can't pay more if you want to. Why do you think wealthy people have accountants? It's to find tax savings to make it possible to purchase corporate aircraft. This is also helps them save more of their money, and not give it away to a wasteful government.

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Rodney Barber
on March 19, 2013 - 1:04pm

Sounds like some of these comments are coming from some bitter losers ("send this two faced coward back to whereever it was that he was really born"). I completely agree with Jeff Burger's article. I work for a private jet manufacturer and I respect what President Obama has said about owners needing to have these tax breaks reduced for their private jets and other luxury items like yachts. The President has not attacked the operaters or those involved in the industry. Times have gotten tough and are going to remain this way as long as the corporations continue to sit on profits instead of investing, they can afford to have these breaks reduced.

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Joe Gring
on March 19, 2013 - 1:08pm

I think all that the article said was that changing the depreciation schedule for business aircraft from five years to seven years would not be the end of the world for our industry.

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Chris
on March 19, 2013 - 1:12pm

I am a finance professional who has owned turbine aircraft and is looking to buy another jet. I know this topic. From your bio it is clear, Mr Berger, you have no idea what you are talking about when it comes to the numbers on taxes and aircraft. You are NOT a pilot, you do NOT own an airplane, you are NOT an accountant and you do NOT have a finance background. How do unqualified people like you justify writing article like this? BTW: if you or Krugman understood the basics, you would know that the corporate cash is offshore and the cost of repatriation is keeping it there. In the meantime, it will de easy for me to do a quick delete of any BJT email that I get with your name near it.

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Kevin
on March 19, 2013 - 1:13pm

Thankfully I wasn't the only one that felt Mr. Burger's article was severely slanted to the Left. Take away AF-One and let's see who starts crying the loudest.

Just like with my guns, you can pry our corporate aircraft from my cold, dead hands.

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Darren
on March 19, 2013 - 1:34pm

Nick, Dan, Jeff...you all are so ignorant. Obama is calling out the wealthy and I surely don't have a problem with it. The crime he suggests extending the depreciation from 5 years to 7...Oh the humanity! As a corporate pilot working for the "1%", they don't need any more tax incentives. If these aircraft are such vital tools for their business, they'll still use them. You know they will.

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ken
on March 19, 2013 - 1:37pm

The businesses that are run well, have a need and are very profitable are the only companies that buy airplanes.
Always have and always will.

Very wealthy people who have an large "artesian well" cash flow and like the convenience of private flying are the only individuals that buy airplanes.
Always have and always will.

All the rest if just noise. Like it or The GA market is slowly getting better under this president. Who cares whos in charge? The economy is getting better.

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Jeff
on March 19, 2013 - 2:41pm

Darren, you are too ignorant to realize you proved my point. You have no problem with Obama calling out the wealthy because you're not one of them. You're a useful idiot in the class warfare game that Obama plays. BTW, I am by no means wealthy, but I have flown and managed aircraft for those who are. Some are jerks, but most are hard-working folks who found success. I'm thankful for the wealthy -- they help put food on my table.

Here's the irony, Darren. You're a pilot for the "1%" -- and you don't even get it that you have a job because of them. And I'll bet you have managed your career by looking for better opportunities where you can make more money. Yet, according to Obama, rich people who want to keep the money they earn are "greedy", but those like you who would want more money for their work are somehow honorable.

Yes, ken, wealthy people with that "artesian well" of cash can buy airplanes, but what makes you think they won't choose to forego that airplane purchase for something else when they are either squeezed by taxes or feel the sting of the bad image politicians have foisted on business aircraft ownership. Rich people still have to make buying decisions at some level and an aircraft can often be something that is purchased on the margin. It's not a 5-yr vs. 7-yr depreciation schedule. The president's philosophy and political methods go beyond the minutiae of aircraft financing. And here's the kicker -- when the rich guy finally dumps his aircraft, who loses their jobs? Then, of course, they're the jerk for cutting the jobs...

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Mark
on March 19, 2013 - 3:17pm

The problem with the argument put forth by Mr. Burger is that it is not addressing the real problem. Weather or not we should tax the rich should not be the point. If you are a lefty, stick it to them is your mantra. If you are a righty, how dare you take more of mine. This class warfare will always be used by politicians. The argument really should be, what can we cut from government in order to make the current amount of taxes we all pay cover the bills and reduce the debt. If I over spent and over debted myself, I cant go to my neighbor next door and demand more money because I cant control myself??

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ken
on March 19, 2013 - 3:38pm

Jeff,

What makes me think they won't forgo the airplane purchase?

I have many years of experience in selling corporate airplanes, both jet and propeller. Wealthy people who have been exposed to the benefits of private airplanes will always have one... IF their cash flow is comfortable. Period. If I could afford it, so would I. It is truly is the best way to travel.

It will serve us best to get past the political emotion, stop the name calling and make benefit oriented arguments for airplane ownership and GA growth.

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Gil Wolin
on March 20, 2013 - 9:54am

Jeff, it's not so much the content of the President's repeated attacks on our industry, as it is the intent behind them. And from 40,000 feet, that intent becomes pretty obvious. This Administration wants to demonize those who use business aviation, and by association our entire industry, as a political gambit to support their larger “Change” strategy. This is not this is not a one-off, chance comment, but rather part of an orchestrated campaign to keep the President's electoral base mobilized, supporting and working on behalf of his agenda.

Early in 2012 the President's reelection campaign conducted market research to determine what issues and specific terms would energize voters, help rally them to his message – and to get him re-elected. They found that “private jets” and corporate jets” were among the best at prompting a visceral Pro Obama/anti-business "Republican" response. Do they really care one whit about the business aviation depreciation schedule or the health of our industry? Hardly. The President is simply using corporate aviation as a straw man to continue fomenting class warfare, and keep his base focused on perceived unfairness.

Why change the depreciation schedule only for business aircraft, a schedule that has been in place for all capital equipment purchases for almost 3 decades? Why define this long-accepted accounting convention as an “unfair loophole?” For political gain, plain and simple. It’s certainly not for revenue – the impact on the deficit of such a change would be less than a footnote to a foot note in the nation’s budget.

From 40,000 feet, when viewed in conjunction with the again-proposed user fees and continued verbal attacks, we see just one more tactic in this Administration’s two-term attempt to effect “Change” and consolidate power by fomenting class warfare.

Congress is divided enough – we don’t need a President working to divide further the rest of the country.

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Jeff
on March 20, 2013 - 10:50am

Gil,

You nailed it. Admittedly, I probably got bogged down into discussing the details of the "straw man." Guess I was just trying to point out the inconsistencies of those who buy into Obama's rhetoric. There's a larger strategy here, one that is historically un-American and, frankly, dangerous. History repeats itself and every form of -ism (communism, fascism, socialism, etc.) can only advance through division and class envy. The irony is that, in every case, the political class that whips up the rhetoric are the ones who most abuse what they demonize. In this case, our messianic leader sees no hypocrisy in his bashing the "corporate elite flying around in their jets" while he heads out in Air Force One on another golf outing. Maybe enough of the useful idiots will see the light someday but, in the meantime, we'll have to suffer through four more years of this mistake(One Big A$$ Mistake America)

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Randy
on March 20, 2013 - 11:31am

Jeff Burger calmly and lucidly presented an opinion that is counter to the prevailing one in aviation, but widespread among those who support the President. Don't shoot the messenger--salute him (as do I) for having the courage to go rogue. Informed debate is at the heart of this country. More PR damage was done to business aviation by the three Detroit clowns who flew their separate Gulfstreams to beg Congress for auto industry bailouts than by Obama's bully pulpit.

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Clif Stroud
on April 2, 2013 - 10:56am

Thank you Jeff (and Business Jet Traveler) for having the courage and the intelligence to say what I have been thinking the last few weeks. You are absolutely correct in questioning the trade associations' response to Obama's comments describing why corporations use business aircraft. It is convenient and if you can afford to use it you should--and promote and justify that use--as the trade associations have done for the industry for so long. The negative image so many people have of business aviation will only be reinforced if we don't stand up for our industry and articulate the real reasons that it works so well.

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Andrew Douglas
on May 29, 2013 - 5:28pm

Bureaucracy begets Bureaucracy, and the initiation of User Fee's will only lead to more and more of it.

Is $100 per flight going to be an issue for anyone or any operation that can afford to operate a turbine aircraft? Obviously no. But let's look at the other side of this coin. That $100 per flight has to be billed. It has to be collected. It has to be tracked. That alone will cost more than $100 per flight. The "cost" of collecting this fee will far exceed the revenue produced. The result will be higher and higher fee's, until the revenue finally outstrips the cost.

But there is another side of this that is never mentioned, and that is safety. While corporate jet's will fly in the flight levels, and therefore be subjected to having to use ATC and be subjected to the fee, the turbo prop or light jet owner/pilot can opt to fly below FL180, and therefore not be subjected to the mandatory filing of an IFR flight plan. This opens two scenario's that DECREASE safety.

The first is to fly in adverse weather, or scud run. Certainly more dangerous than filing an IFR flight plan and using the system, but if on a shorter flight, where the weather isn't perfect, there will be the financial encouragement to save the hundred bucks and go VFR. This is not as safe, I don't care what anyone says.

The second is to fly further than comfortable, to avoid two medium length flights when one long flight may suffice. This causes yet another unsafe condition. Fuel requirements might be stretched, and if a missed approach is followed by the need to go to another airport, while legally the fuel is to be there, it could easily cause reserves to be stretched where they wouldn't have been before. Also, pilot fatigue will be an issue. Yet another safety issue inserted into the system because of user fees.

IF (and I capitalized that on purpose) the FAA needs more funding from general aviation, there is a system already in place to accommodate that, and will not add one iota to the cost of collection. Increase the aviation fuel tax. It is as simple as that.

We don't need another huge department of government. We just need better management.

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“"How many leaders actively seek out and encourage views alien and at odds with their own? All too few...Who in your organization serves as your Challenger In Chief? Interrogating the choices you are considering making? Making you consider the uncontemplated, the unimaginable and that which contradicts or refutes your position? And also challenging you?"”

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