Proposed Tax Cuts May Hurt Manufacturers
Joan Lowy, Associated Press
WASHINGTON (AP) — The industry behind corporate jets was scrambling Thursday to fend off President Barack Obama's proposal to eliminate a tax break that encourages businesses to purchase the planes, saying it will hurt the economy and cost jobs.
Aircraft manufacturers, fuel suppliers, repair services and other segments of the industry employ 1.2 million people and generate $150 billion in economic activity, according to the General Aviation Manufacturers Association.
If Congress goes along with Obama's recommendation to extend the tax depreciation schedule for corporate planes from five years to seven years companies will have less incentive to buy new planes, industry officials said. The president cited ending the special tax treatment as an example of the kind of sacrifice Republican lawmakers should make to help resolve the government's budget dilemma.
"While such talk may appear to some as good politics, the reality is that it hurts one of the leading manufacturing and exporting industries in the United States," Peter Bunce, president of the aviation manufacturers association, and Thomas Buffenbarger, president of the International Association of Machinists and Aerospace Workers, said in a letter to Obama.
Obama is trying to demonize the private plane industry and engage in class warfare, Sen. Mike Johanns, R-Neb., said.
"The reality is that good people lose jobs when we play politics with an entire industry," he said.
The depreciation schedule for airlines is seven years. But the more advantageous five years for corporate planes has been in place since 1987.
White House spokeswoman Amy Brundage said the proposal "is about ensuring everyone pays their fair share to reduce the deficit and put the economy on stronger footing."
"The president is simply leveling the playing field by giving corporate jet owners the same depreciation rate as commercial jets," she said. "This won't cost one American job and will end an unfair tax preference for products with powerful lobbyists."
Eliminating the tax break would save an estimated $2 billion to $3 billion over the next decade, according to Republican congressional aides and industry officials. The White House hasn't provided an estimate.
Deliveries of new private planes have dropped by more than half in recent years. In 2007, there were 3,279 newly manufactured planes — business jets, piston planes and turboprops — delivered, according to aviation manufacturers association. Last year, there were only 1,334. More than 20,000 workers have been laid off, according to the machinists union.
Obama's call Wednesday to end the tax break caught aviation industry officials by surprise, although several Democratic members of Congress have made similar suggestions in recent weeks.
The day before Obama's remarks, the president praised Alcoa workers for making the wings of Air Force One during a trip to Iowa.
"The very next day he says he wants to kill any tax incentive to buy the business jets that have Alcoa products in them," Aerospace Industries Association president Marion Blakey complained Thursday. "It's baffling and disturbing." She called Air Force One "the biggest corporate jet in America."
At a celebration of the private plane industry at Cessna's headquarters in Wichita, Kan., in March, Transportation Secretary Ray LaHood described the industry as essential to the nation's economic recovery and to reaching Obama's goal of doubling the nation's exports.
Corporate jets were also a target of Democrats in 2008, when auto industry executives flew to Washington on private planes to ask Congress for a bailout. The resulting backlash against the planes as symbolic of a business elite out of touch with the struggles of average Americans contributed to a wave of cancelled orders, said Katie Pribyl, a spokeswoman for the aviation manufacturers association.
The private aircraft industry — manufacturers, suppliers, service providers and airports that cater to the planes — have contributed about $6.7 million to current members of Congress over the past decade, according to the Center for Responsive Politics.