Taxes on private jets sought
Companies benefit from laws allowing for write-off of planes, lower payments for fuel taxes
WASHINGTON — The Biden administration is looking to the skies for government revenue, scrutinizing corporate jets as it tries to get big companies to pay more in taxes and to crack down on rich tax evaders.
From Taylor Swift to Fortune 500 CEOs, private air travel has for years been portrayed to exemplify lavishness and excess, putting it on the radar of Democrats who want to rid the tax code of incentives that promote its use.
Companies have long benefited from laws that allow them to write off the cost of jets more quickly than commercial airlines can, and to pay less in fuel taxes. Included in the $5 trillion of tax increases proposed by the White House were plans to target corporate aviation and ramp up scrutiny of executives who use company planes for private trips.
President Joe Biden raised the subject of the taxation of corporate jets at his State of the Union address this month and at a campaign event in Philadelphia two weeks ago as he laid out his ideas to make big companies “pay their fair share.”
At a Senate hearing Thursday, Treasury Secretary Janet Yellen praised the IRS for embarking on a “new initiative to end abuse of corporate jet write-offs.”
The ideas have drawn swift backlash from the corporate aviation industry, which argues that the proposals unfairly undercut American companies that rely on private planes to allow their executives to more easily visit factories and remote offices.
“We haven’t seen any real justification on why an important and essential American industry is being targeted for tax increases,” said Ed Bolen, president and CEO of the National Business Aviation Association.
Biden’s budget, which is unlikely to be approved by Congress, would hit corporate and private jet users in two ways.
It would raise the tax on jet fuel to $1.06 per gallon from 21.8 cents per gallon over five years.
The money goes to the Airport and Airway Trust Fund, which helps finance federal investments in the airport and airway system. The Biden administration contends that the current rate is too low because private jets represent 7% of flights handled by the Federal Aviation Administration but contribute just 0.6% of the taxes in the fund.
The other proposal would target a lucrative tax break that allows companies to deduct the cost of their planes quickly. Currently, a business can write off a jet’s expense over five years, instead of the seven-year period that applies to commercial airplanes. The budget proposed the same seven-year tax treatment for corporate and commercial jets, which is known as “bonus depreciation.”
The White House estimates that the proposals would raise $4 billion over a decade.
“This is about leveling the playing field for the middle class by making big corporations and the wealthy finally pay their fair share — whether it’s cracking down on wealthy tax cheats or closing loopholes for corporate jet purchases — so we can cut the deficit and invest in the American people,” said Michael Kikukawa, a White House spokesperson.
The White House proposals came just weeks after the IRS announced that it would begin cracking down on corporate jet owners that abused the tax code.