Amid the myriad changes the GOP Senate and House tax bills are making, one that took some flak is what appears to be a tax cut for those that own private jets.
It's a small part of the bill but is one of those meme-friendly things so it got a lot of attention.
It was called a tax cut from many reputable news sources, so such a claim gets some credibility beyond just memes. Here are a few reporting this as a "tax cut" or a "deduction:"
- The Independent (UK)
- US News & World Report
- The Washington Times
- VICE and NYT journalists also talked about it as a tax cut
However, It's Complicated
Turns out the private jet tax rewrite isn't as straightforward as it seems. We can see the story grow more complicated as we see how news networks change how they're talking about it as time goes on. Let's look first to a November 16th article by The Hill (as found on Twitter with someone commenting on it):
However I can't find that article anymore. Instead, The Hill has an article named, "Senate bill clarifies tax law for private jet companies." Which is a pretty big difference.
So what gives?
What it certainly isn't is a deduction, as some claim: The GOP is not introducing any language to write off expenses incurred while a private owner maintains a private jet. That's simply not there.
Here's what's going on, in short:
- Commercial airline companies pay what's called a "ticket tax," which pays for things such as air traffic control
- Private air charter companies instead pay things like taxes on fuel
- Some people who own their own private jets will pay other companies to manage the plane for them
- In 2012, the IRS released a memo saying that it believed the ticket tax, as written, applied to management companies (meaning they would pay both the ticket tax and the fuel tax, and pass that tax to the owner of the plane when they flew)
- It did not levy back-taxes for the "ticket tax" but aircraft management companies were not sure if they were liable for the tax or not
- In July 2017, the IRS froze any effort to audit and collect back-taxes
- The Senate tax bill includes a clarification that the ticket tax only applies to commercial flights, not to aircraft management companies
- According to a 2016 letter from the Joint Committee on Taxation, the difference in federal revenues over the next 10 years (of whether or not the ticket tax applies to these management companies) is about $500,000.
That's what there seems to be to it.
Calling this a "tax break" or a "tax cut" is misrepresenting what's going on. There has been a 5-year lack of clarity for the IRS and aircraft management companies about whether these taxes are owed, and wasted time & paperwork in both over the uncertainty.
It's not clear whether journalists at companies like the Washington Times are being intentionally misleading or made a mistake. But either way, it weakens one's case against a bill when one misrepresents a headline policy as a seemingly-significant billionaire tax cut when it is instead a clerical clarification for a small amount of money.
Should Private Jet Owners Pay the Ticket Tax?
The other question to walk away with is whether the Senate should have made the decision to apply the ticket tax to private flights, even though that was not the original intent. Private flights consume just as much air traffic control (ATC) attention as commercial flights, but pay far less in taxes to support the ATC system.
An argument could be made that taxes on private flights should go up, and that's a conversation worth having. However, misrepresenting the Senate's clarification as a "tax cut" will not help the conversation.