Friday, July 01, 2011

Get rid of the jets

Wednesday's speech by President Obama made it clear that when it comes to dealing with the nation's debt problem, Republican lawmakers need to be willing to raise taxes on the richest Americans.

In the speech, the president said, " If everybody else is willing to take on their sacred cows and willing to do tough things in order to achieve the goal of real deficit to reduction then I think it would be hard for the Republicans to stand there and say that tax break for corporate jets is sufficiently important that we're not willing to come to the table and get the deal done."

What the president may have been referring to is an attempt by some Democrats to close up a tax loophole called "accelerate depreciation." In layman's terms, it is a depreciation method which allows faster write-offs than the straight line method.

I once worked for a large super regional bank that owned a corporate "jet". It was actually an eight seat prop plane that was scarier to ride in than crossing the Brent Spence Bridge.

As a member of the company's due diligence team, I would frequently get a ride on the plane to such destinations as Scranton PA, Lorain OH, Crawfordsville IN to name a few.

Often, the plane was used because commercial travel was too unwieldy to get 10-20 people to such awesome destinations.

But from what I understand most companies have forgone their company jet fleets to outsourcing services like Net Jet, where the company simply pays for what flight time it uses and no more.

If a company does own a jet, it usually allows a company like Net Jet to rent it out for other travelers to use.

So while the president wants to paint a picture of a bunch of Fat Cats hauling their jets off to some tropical island to get a round of golf in. The truth is that unless a company official can tie their business around their personal travel, they have to pick up the use of that jet as taxable income. Kind of like when the president flies to Philadelphia on AF1 for a fundraiser, I mean, official visit.

Changing the depreciation methods is a total canard. The only thing the depreciation method might influence is the timing of a jet purchase not the decision to own one.

But never let the facts get in the way of a good story.


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