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News The tax on corporate jets.

  1. Jul 3, 2011 #1
    Here is an excerpt from the President's June 29, press conference.


    As I understand it, the tax code is thousands of pages long and is filled with special conditions for this industry and that. Apparently, there is special treatment for corporate jets. There are two ways to help the corporate jet industry. One would be to hand them a check for $x, and the other way would be to lower their taxes by $x, or in this case, I think it lowers the taxes of their customers. Either way it's $x. From the point of view of the jet manufacturers and their customers, the tax break is better than a check in two ways. 1. It doesn't look like welfare even though it is. 2. If someone suggests that it be taken away, they can be accused of raising taxes.

    However, there is a larger issue here. The govt has decided to support some companies at the expense of others. How is this different from the central planning that worked so poorly for the Soviets? In the light of that question (I hope someone can answer it.) it comes as no surprise to me that the Democrat President would say "It would be nice if we could keep every tax break there is." Let us delete one line from that thousand page document and really stick it to those fat cats while continuing to micromanage the economy. What does surprise me is the response from the Republicans. I would have expected them to say, "It would be nice if we could get rid of every tax break there is and get the govt off the backs of the business community. But THIS tax break is not the right place to start." That would have made sense. Instead, they are saying that this is a good tax break and we should keep it. Is there a politician left in this country that isn't a #%$&ing Communist?
    Last edited by a moderator: Apr 26, 2017
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  3. Jul 3, 2011 #2

    Ivan Seeking

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    Barack :biggrin:

    I doubt that corporate jets are treated any differently than other business purchases. While I agree with the tone of your complaint, I don't see how it qualifies as special treatment.

    Besides that, we just got a new BBQ that is partly deductible for the business, so you're treading on thin ice when you try to take away my tax deductions. We're talking about a $100 deduction here!
  4. Jul 3, 2011 #3
    Now that's just incorrect. Welfare is when the government gives someone money, not when someone "doesn't give" government (as much) money. Eliminating a tax deduction is "raising taxes" as a matter of reality, not an accusation.

    Even under the assumption that the tax "should be" paid, its not being paid is not the same as someone being "given" money.

    As far as being communist, the false equivalency above is far more communist than using the tax code to tax people differently. That false equivalency, although common, uses the assumption that the money in question is owned collectively (controlled by government), in an original sense.
  5. Jul 3, 2011 #4

    Ivan Seeking

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    However, if some companies get special [unfair, inequitable] treatment, it isn't a strict matter of taxation. So what would you call it?
  6. Jul 3, 2011 #5

    Vanadium 50

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    Yes, you're right, that the tax code is complicated. To be honest, I don't understand exactly what the President has in mind here, since he hasn't specified exactly, and the tax code is complicated. In calculating how much profit your firm made (and thus can be taxed on), the accounting is such that if the company buys some property, it can't take the full cost as an expense the year it's purchased - it has to spread it out over three, or five, or seven, etc.. How long depends on the kind of property. Computers are five year property. Office chairs are seven year property. And so on.

    Under current law, aircraft are 5-year property. If you buy an airplane, you can expense 20% of its cost for each of the first five years of operation. (I won't get into MACRS here) I don't know if the President is suggesting that aircraft become 7-year property (the default) or what.

    To first order, this doesn't change how much money the government gets - only when it gets it. To second order, the longer the item takes to depreciate, the harder it is for companies to try and time things so that they are in different brackets in different years. If a company is normally in the 35% bracket, but can shuffle expenses in and out of fiscal years, and can spend on year in perhaps 5 in the 15% bracket, they make more money.
  7. Jul 3, 2011 #6


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    Commie, Schwammie......

    What I want to know is; "Why, if communism is so bad, are the Chinese winning the economic war?"

    And those darned Rooskies! 18 years ago, they were also stinkin' Commies. Now they've got a bazzilion billionaires in Moscow!


    When I'm short of change, I pull up the cushions on the couch and look for long lost pennies, dimes, and nickels.

    hmmm..... Where am I going with this?

    That new Cain dude. I like him. He sounds like Jefferson.

    "We don't need 1200 page bills!"

    I agree. A 1200 page long bill is just stupid. I don't care what John Stewart said about him; "I don't like to read!"

    And on the eve of America's 235th anniversary, I do'est quote, one of my most favorite and respected presidents:

    I will dwell on the above, and Obama's push for US universal internet access, and us being informed, later. But it's time to play some music.


    God bless America.

    If only you could see young Thomas, that one day, if they'd just open their eyes, and ears, and minds, they could be. And by the way, thank you for founding us a great nation. :)
  8. Jul 3, 2011 #7
    Sure, it's a matter of taxation, even if the taxation is unfair and discriminatory. That's why so many of us want to eliminate the tax code as we know it in favor of a simple, fair tax system.

    For example, there is no legitimate reason for government to tax the customers of GE's competitors but not GE's own customers (via a discriminatory corporate income tax). This gives GE a huge advantage over its competition. A flat corporate income tax (sales tax) would tax their customers equally, and not give an unfair advantage to anyone. So would eliminating that tax altogether.
    Last edited by a moderator: Jul 3, 2011
  9. Jul 3, 2011 #8


    Staff: Mentor

    They are not winning. They just aren't losing as badly as they used to. And the reason why is that they have started to adopt capitalism and relax their communistic policies.
  10. Jul 3, 2011 #9
    The govt giving me $1 more or me giving the govt $1 less is a distinction without a difference. Especially since it is argued that one is bad and the other is good.
  11. Jul 3, 2011 #10
    I was speaking about the Central Planning Committee of Congress, the committee that decides which businesses get tax breaks and which ones don't. I am interested in hearing why this horribly failed policy of the Soviets is expected to work well here. I am suggesting that the govt get out of the business of picking which businesses deserve extra money and which ones don't and let the free market make that decision. This is 'far more communist'? No wonder we have the current system.
  12. Jul 3, 2011 #11
    I have a great deal of experience in the large ticket leasing business (main frames, aircraft, ships, locomotives, heavy equipment, medical equipment, and buildings). Large companies typically lease executive jets - replacing them often for newer models and avoiding maintenance and re-sale issues. This type of accounting adjustment will have an effect on lease finance structure and terms - the executives cruising at 30,000 feet will not know the difference - IMO. This is nothing but cheap sales talk from the President - again IMO.
  13. Jul 3, 2011 #12

    Vanadium 50

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    Of course it won't make a huge difference. Charles Krauthammer says it best:

    This won't make a dent in anything. As I pointed out, to first order, the effect is revenue neutral. It's there to fire up the base. Judging from the messages here, it worked.

    My real fear in this is that it will cause a collapse of one or more major airlines. Exxon owns nine jets. United Continental Holdings owns almost 700. Who do you think will be affected more?
  14. Jul 3, 2011 #13
    I wouldn't have thought that United's jets would be considered 'corporate jets', but I don't know for sure. If I'm right and they aren't, then my point is that the current setup would tend to benefit Exxon over United, and changing it as Obama wants would tend to level things. Changing this single line of that 1000 page document is for show only. I am in favor of removing all of the special cases in the tax law and get the govt to stop playing favorites. The free market is the most efficient way to determine which businesses deserve to prosper.
  15. Jul 3, 2011 #14
    It's doubtful the President or the political speech writer knows the tax code related to aircraft - IMO.
  16. Jul 3, 2011 #15
    The difference isn't the $1 itself, the difference is between you giving government money and the government giving you money. One is welfare while the other is taxation.

    According to your logic, all privately created wealth not taken by government via taxation is equivalent ("without a difference") to welfare.
  17. Jul 3, 2011 #16

    Vanadium 50

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    As far as I can tell without paying an accountant, the present "corporate jet tax break" is that airplanes are treated as 5-year property rather than the default 7-year. This is true no matter who owns the airplane, and that's part of the tradition of equality in the USA: laws apply to everybody equally. If you're a company, and you own a chair, it's 7 years, whether you are Exxon or Continental. If it's an airplane, it's 5 years, again whether you are Exxon or Continental.
  18. Jul 3, 2011 #17
    Again, if Exxon or Continental are leasing the aircraft for 3 years - they don't care about the depreciation schedule - the leasing company and finance partners are affected - the leasing industry is based upon tax laws.
  19. Jul 4, 2011 #18
    This. It's a buzzword to point out percieved corporate extravagance.

    Small companys can own private aircraft, as well. There's lots of small courier operations, private trainers, crop dusters, etc that have aircraft and are not a percieved extravagance. While I don't claim to understand the tax code well, in this case, so speaking purely hypothetically: if you make the end user pay more - it's going to hurt those whom rely on aircraft for their livelyhood as you can't differentiate between 'travel for meeting' and 'crop dusting' as different reasons for owning a plane. Travel, for many contractors, sales folks, etc, is just as integral for their business as the crop duster.
  20. Jul 4, 2011 #19
    No it isn't. The difference is between me NOT giving the govt money and the govt giving me money. Either way I end up with one more dollar more in my pocket, the govt with one dollar less. As I said, the beneficiaries prefer the tax reduction over the handout because it fools people.

    Again, the larger issue is that the govt is selecting the airline industry over the rail industry. Why?
    Last edited: Jul 4, 2011
  21. Jul 4, 2011 #20
    Again, by your logic, your failure to send me $100 yesterday is equivalent to you taking $100 from me. After all, either way, you have $100 more while I have $100 less, right? Did you do the equivalent of taking $100 from me yesterday? And again today? You plan on ripping me off tomorrow, too? Why must you take money from me every day?

    Are we done with such nonsense?
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