Ben Franklin Was Wrong— But What's Right?

Business Jet Traveler » February 2014
Friday, January 24, 2014 - 1:00pm

Unless you hang your hat in Delaware or New Hampshire or live in one of the few countries that don’t assess sales tax, you probably hand money to the government almost every time you buy something. In many U.S. states, the levy on purchases runs 5 to 7 percent or more and, with local surtaxes, you can wind up paying as much as 15.5 percent on most purchases.

If you’re feeling the pain, you may be glad to hear that Ben Franklin was at least half wrong when he said nothing is certain except death and taxes. True, we’re still stuck with mortality, though Google did recently form a company aimed at delaying or eliminating it. (I’m not making this up.) But as for government levies, Franklin clearly had no clue about the loopholes future legislators would create—or about how many lawyers would be standing by to help you jump through them.

When it comes to sales and use taxes, for example, one West Coast U.S. law firm is so confident that it can facilitate your claim for an exemption that it promises to do so even before reviewing your situation. “We guarantee you will legally avoid California sales and use tax on your purchase,” says its ad, which points out that “although our expertise began with California, we have advised many clients on how they can legally minimize or even avoid sales and use tax in various states across the nation.” Another law firm with the same specialty not only boasts a “100 percent success rate” but claims it may be able to help you sidestep tax on purchases you’ve already made—even if the transaction occurred up to a decade ago.

Wow. But here’s the caveat: as the ads from these firms explain, the loopholes they’re talking about won’t work at your local department store. They apply only to certain ultra-high-end items like yachts and—you guessed it—business jets. If you’re in the market for such an item, though, the good news is that your savings could amount to hundreds of thousands or even millions of dollars. 

Is that fair? After all, if buyers of all products could use this dodge, how would states and municipalities find the funds to provide the services they need to deliver? 

Not to worry, suggest some proponents of the tax-avoidance approach, because with the money you don’t pay the government on your airplane or yacht purchase, you can buy even more things for yourself or grow your business, and that will ultimately help everybody. As a not-too-articulate client of one of the aforementioned law firms put it in an online testimonial, “We saved in excess of $250,000 and there was extra capital to do better business in contribution for economic growth.” 

At least one pilot clearly rejects that trickle-down argument. As he wrote in a posting on our sister website, ainonline.com: 

I’m embarrassed that so many in the flying community seem to feel entitled to exemptions from sales taxes—a tax that everyone else...has to pay.…We cheer at government subsidies for repair and enhancement to the airports and facilities we use but grumble and, worse, whine like overprivileged children when asked to pay the same tax rate on our planes and propellers and annual inspections that our less-wealthy neighbors have to pay for their children’s shoes and school supplies and—in some states—food and medicine. Shame on us. We’re spoiled brats, the very model of the ‘takers’ we blame for the ills of our society. We should pay our taxes like everyone else.

What’s your view? Whatever your position on this issue may be, please drop me a line at jburger@bjtonline.com and let me know. We’ll run a sampling of the responses we receive in our letters column. n


Jeff Burger (jburger@bjtonline.com) is the editor of BJT.

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““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”

-David Yermack