The GOP’s Tax Breaks for the Private Jet Set

luxury-tax breaks-jet set

(Photo: Aleksandr Markin)

When you think about who benefits from the Republican tax bill the Senate just passed, think of the people who own and ride in private luxury jets.

We know that the benefits of tax bill are skewed to the very wealthy and a handful of global corporations. Republicans have been rushing this bill fully aware that the more people learn, the less they will like it.

As Edward Kleinbard, the esteemed tax economist and former head of the non-partisan Joint Committee on Taxation, observed: “We are squandering a giant sum of money” in this tax bill. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”

Kleinbard’s donor class aren’t people that write $ 100 checks to candidates. He’s talking about billionaires who donate to a wide range of campaign organizations, some with their identity obscured, to move a larger agenda.

These people don’t even fly in first class. They’re the high flyers that fly in private jets.

Our new report, High Flyers 2017, examines the outsized influence private jet owners play in ensuring their massive tax subsidies. The private jet lobby, our report shows, spent more than $ 56 million over the last decade to secure more than $ 1 billion in tax breaks. Not a bad return on their investment.

The tax scam that just passed the Senate and will now be merged with the House version in a conference committee expands these carve outs and special provisions for private jets. Meanwhile, the Republican budget plan, moving right behind the tax bill, nearly doubles the passenger facility fees that commercial passengers will pay on their tickets.

A family of four, taking a trip with a layover, will pay an additional $ 32 per trip. Meanwhile, the already heavily subsidized private jet passengers will pay an extra zero dollars.

Private jet passengers and owners don’t come close to contributing to the upkeep of our air traffic control system or our airports.

Per flight, private jets generate about 2 percent of the taxes and fees of commercial flights on an identical flight. Consider just one example: A privately owned jet flying from Nashville to Philadelphia would pay nearly 98 percent less than an identical commercial flight.

Put differently, commercial airlines pay 40 times more in taxes than private jets to take the exact same flight.

Meanwhile, they’ve fended off almost all of the post-9/11 security rules that commercial passengers must face.

While commercial passengers stand in their socks and watch their grandmother get frisked by a stranger, the private jet flyers have a voluntary security regime. They drive right up to their private aircraft and unload their rifles and golf clubs directly into the passenger compartment. No body screen. No three-ounce bottles. No security door separating passengers from pilots. This is just one more example of the ways our deeply unequal modern society prevents the super-wealthy from experiencing — and thus perhaps being concerned about — the everyday indignities faced by those without means.

In 2008, the Transportation Security Administration (TSA) was advocating for new regulations on private jets. At the time, Homeland Security Secretary Michael Chertoff had voiced concerns about “terrorists” using private jets and proposed expanded background checks on passengers and tightening security for small airports.

But the private jet lobby mobilized its powerful network of wealthy and powerful customers, pilots and companies. They pressed regulators, and by 2010 the TSA had backed off plans to increase security of private jets.

Commercial airline passengers should not have to subsidize private jets. Period.

We should end the private jet tax carve-out and require private jets to pay the same taxes and fees that commercial air travelers cover.

The Trump tax plan will make this problem worse, not better.

The post The GOP’s Tax Breaks for the Private Jet Set appeared first on Institute for Policy Studies.

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The GOP’s Great Depression Tax Plan

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Everett Historical / Shutterstock

Critics of this fall’s tax reform spectacle on Capitol Hill never seem to miss an opportunity to contrast the GOP’s rush to judgment today with what they hail as the measured, bipartisan approach to tax reform back in 1986.

Back then, the line goes, legislative statesmen from both sides of the aisle joined and vanquished tax policy’s most ornery sacred cows. They slashed individual tax rates while closing loopholes favored by corporations—without party line votes or deceitful math.

But if we want a historical analogy that illuminates our present political moment, we would do well to ditch 1986 and look back to 1932, a year when America’s political elites made an amazingly brazen tax move to comfort America’s already comfortable. Sound familiar?

At that time, we were in trouble. The Great Depression had left government barely able to function. New revenues, almost everyone agreed, simply had to be raised.

Where to get these revenues? According to the political elites, top Democrats and Republicans alike, only tax breaks for the rich could start the nation down the road to prosperity.

Read the full article on Fortune.

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Private Jets and Trust Fund Kids Show Where the GOP’s Tax Priorities Lie

private-jet-gop-tax-plan

Shutterstock

It’s hard to keep track of the fast-flying tax legislation making its way through the sausage-making process in Washington. It’s even harder to know just what’s in each bill, as the thousands of pages of provisions are constantly in flux. To know what’s really behind the Republican tax cutters’ priorities, cut out all the noise and consider just two things: private jets and trust fund kids.

You’ve likely heard of some provisions included in the Senate tax bill under consideration right now, like lowering the corporate tax rate and changing the tax brackets for individual income tax returns. Less discussed is how the bill treats private jets: A measure in the bill exempts private jet owners from paying taxes on all the costs that go along with owning a private jet such as storing it, maintaining it, hiring staff to fly it and cater on it, and so on and so on. In other words, this is basically a blatant gift to folks who own private jets.

Who likes private jets? Well consider the major controversy of Trump administration officials racking up seven-figure private jet fees on the taxpayer dime this year. Such behavior cost former Health and Human Services Secretary Tom Price his job, and probably should have cost others theirs as well.

The private jets provision is indicative of who’s at the table when details are getting hashed out in the Senate – the wealthiest presidential cabinet in American history. Also at the table: their multi-millionaire and billionaire friends.

The idea that private jet owners need a tax break is absurd on its face. Private jets are heinous for the environment, clog up our airports and already receive massive tax advantages. If you can afford a private jet, you can afford to pay taxes on it. That just seems basic.

Also underreported is the Senate plan to first weaken, then fully eliminate, the federal estate tax, a levy on the intergenerational transfer of immense wealth. The bill will give a tax break to just 5,000 people a year, all of whom will be heirs and heiresses to multi-million and billion dollar wealth dynasties. Seriously, in what world do these people need a tax break?

To really understand just how nuts this is, consider this: The billionaires who make up the full Forbes 400 list now own more wealth than the bottom 64 percent of the U.S. population, an estimated 80 million households or 204 million people — more people than the populations of Canada and Mexico combined.

Never before has so much money funneled into so few hands in the modern history of the United States. And what we’re witnessing, before our very eyes, is the transfer of that wealth into political power.

No one wants to see the rich pay less in taxes except the rich themselves and folks who think they’re about to get rich – but they’re not a majority of this country. Year after year, polling from Gallup (as well as a bunch of other polls) shows that most people want to see the rich pay more, not less, in taxes.

The backers of this tax plan have seen these polls, and they know that it’s bad optics to ask a nurse to pay more in taxes while the descendants of the Mars, Koch and Walton families, the nation’s three richest, all get handouts.

The folks who need a break are the 1 in 5 households that have zero or negative wealth, meaning they owe more than they own. That break comes in the form of basic public programs, funded by tax revenue, that form the backbone of civic society and generate economic opportunities for folks who weren’t born rich to build wealth. Eroding the tax base through tax cuts for the rich, and eliminating those public programs by extension, is bad economics.

This tax plan is irreparable. Congress should start over with the needs of working people at the forefront, not the billionaires.

The post Private Jets and Trust Fund Kids Show Where the GOP’s Tax Priorities Lie appeared first on Institute for Policy Studies.

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Private Jets and Trust Fund Kids Show Where the GOP’s Tax Priorities Lie

private-jet-gop-tax-plan

Shutterstock

It’s hard to keep track of the fast-flying tax legislation making its way through the sausage-making process in Washington. It’s even harder to know just what’s in each bill, as the thousands of pages of provisions are constantly in flux. To know what’s really behind the Republican tax cutters’ priorities, cut out all the noise and consider just two things: private jets and trust fund kids.

You’ve likely heard of some provisions included in the Senate tax bill under consideration right now, like lowering the corporate tax rate and changing the tax brackets for individual income tax returns. Less discussed is how the bill treats private jets: A measure in the bill exempts private jet owners from paying taxes on all the costs that go along with owning a private jet such as storing it, maintaining it, hiring staff to fly it and cater on it, and so on and so on. In other words, this is basically a blatant gift to folks who own private jets.

Who likes private jets? Well consider the major controversy of Trump administration officials racking up seven-figure private jet fees on the taxpayer dime this year. Such behavior cost former Health and Human Services Secretary Tom Price his job, and probably should have cost others theirs as well.

The private jets provision is indicative of who’s at the table when details are getting hashed out in the Senate – the wealthiest presidential cabinet in American history. Also at the table: their multi-millionaire and billionaire friends.

The idea that private jet owners need a tax break is absurd on its face. Private jets are heinous for the environment, clog up our airports and already receive massive tax advantages. If you can afford a private jet, you can afford to pay taxes on it. That just seems basic.

Also underreported is the Senate plan to first weaken, then fully eliminate, the federal estate tax, a levy on the intergenerational transfer of immense wealth. The bill will give a tax break to just 5,000 people a year, all of whom will be heirs and heiresses to multi-million and billion dollar wealth dynasties. Seriously, in what world do these people need a tax break?

To really understand just how nuts this is, consider this: The billionaires who make up the full Forbes 400 list now own more wealth than the bottom 64 percent of the U.S. population, an estimated 80 million households or 204 million people — more people than the populations of Canada and Mexico combined.

Never before has so much money funneled into so few hands in the modern history of the United States. And what we’re witnessing, before our very eyes, is the transfer of that wealth into political power.

No one wants to see the rich pay less in taxes except the rich themselves and folks who think they’re about to get rich – but they’re not a majority of this country. Year after year, polling from Gallup (as well as a bunch of other polls) shows that most people want to see the rich pay more, not less, in taxes.

The backers of this tax plan have seen these polls, and they know that it’s bad optics to ask a nurse to pay more in taxes while the descendants of the Mars, Koch and Walton families, the nation’s three richest, all get handouts.

The folks who need a break are the 1 in 5 households that have zero or negative wealth, meaning they owe more than they own. That break comes in the form of basic public programs, funded by tax revenue, that form the backbone of civic society and generate economic opportunities for folks who weren’t born rich to build wealth. Eroding the tax base through tax cuts for the rich, and eliminating those public programs by extension, is bad economics.

This tax plan is irreparable. Congress should start over with the needs of working people at the forefront, not the billionaires.

The post Private Jets and Trust Fund Kids Show Where the GOP’s Tax Priorities Lie appeared first on Institute for Policy Studies.

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The GOP’s Corporate Tax Giveaway Negates the Benefits of Closing the CEO Pay Loophole

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Shutterstock

The just-released Republican tax bill would take long overdue action to close a loophole that encourages excessive executive compensation. But while I’ve been calling for this loophole to be closed for 20 years, I’d much rather see it remain in place than have it eliminated as part of a GOP tax bill that would be devastating for our country.

In an op-ed for Politico, I explained the origin of this CEO pay loophole: a 1993 tax bill that amended Section 162 of the code to set a $ 1 million limit on the amount corporations can deduct from their federal income taxes per executive for the expense of executive compensation. Unfortunately, lawmakers undermined the intent of the law by including a huge loophole for so-called “performance” pay. Essentially, this means the more corporations give their executives in stock options and certain other bonuses, the less they pay in taxes.

For example, Trump economic advisor Gary Cohn, one of the architects of the GOP tax plan, received more than $ 72 million in fully deductible “performance” pay in 2016 as president of Goldman Sachs. That payout for just one man lowered Goldman Sachs’s IRS bill by an estimated $ 25 million.

According to an Institute for Policy Studies report, between 2010 and 2015 the top 20 U.S. banks paid out more than $ 2 billion in fully deductible performance bonuses to their top five executives. At a 35 percent corporate tax rate, this translates into a taxpayer subsidy worth more than $ 725 million, or $ 1.7 million per executive per year.

Section 3802 of the Republican bill would eliminate the “performance” pay loophole. In other words, corporations could deduct a maximum of $ 1 million per top executive, regardless of the form of the compensation. Unfortunately, the bill does not extend this strict cap to employees beyond the CEO, CFO, and the three other highest paid employees. As a result, pay above $ 1 million going to Wall Street traders, celebrities, and other highly paid non-executives would remain fully deductible.

This Republican proposal builds on the Affordable Care Act, which eliminated the “performance” pay loophole for the health insurance industry and lowered the cap to $ 500,000. (Ironically, the failed GOP health care proposal of earlier this year would’ve eliminated those tighter limits.) Similar restrictions were also applied to financial bailout firms.

The Joint Committee on Taxation estimates that if the GOP bill becomes law, closing this loophole would generate $ 9.3 billion in revenue over 10 years. That’s considerably lower than the $ 50 billion JCT revenue estimate for a Democratic bill, the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act, which would eliminate the “performance pay” exemption and cap the deductibility of compensation at $ 1 million for every employee.

And this $ 9.3 billion is peanuts compared to the staggering cost of the GOP’s proposal to slash the federal corporate tax rate from 35 percent to 20 percent. The Tax Policy Center has estimated that the rate cut would cost $ 2 trillion over 10 years.

I’ve long argued that eliminating this “performance” pay loophole would not only generate revenue fairly but also provide an incentive for lowering overall CEO compensation. But these benefits would be completely negated by other parts of the GOP plan.

Instead of encouraging more rational pay levels at the top, the legislation would be a huge jackpot for CEOs and other top earners. For example, they would benefit from the drastic cut in the corporate tax rate, since most executive pay today is in the form of stock options or other stock-based pay, which will be inflated by this move. Many top earners will also benefit from the huge reduction in the rate for pass-through entities, including hedge funds and private equity funds.

Closing this perverse CEO pay loophole would be nice — but not if it comes at the expense of the colossal damage that would be inflicted on the poor and middle class by the GOP’s tax giveaway for the wealthy and big corporations.

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