Good…embarrassing…or just plain out of touch?

[gret]

While catching “Around the Horn” this afternoon, AIN Alerts came thru the email with its Thursday edition. One of the topics reported was the NBAA wrote letters to Congress asking for bonus depreciation on private a/c-

NBAA has joined other organizations in urging Congressional leaders to continue stimulating business capital expenditures by extending the accelerated, or “bonus,” depreciation that is set to expire at the end of this year. In a letter sent to both houses of Congress yesterday, the groups said, “It is imperative that we continue the 50-percent bonus depreciation…for 2013 and beyond. This will provide some certainty to U.S. businesses to allow them to continue to make capital investments, which in turn will create more jobs and help ward off a possible recession in 2013.”
​

The NBAA and NATA are industry advocates and their job is representing the industry. They have defended personal use of aircraft by business executives, written letters to the President dissing him for comments made about corporate jets and use of Air Force One, attempted to justify the auto executives flying large cabin aircraft to their testimony in front of Congress asking for a bailout, and just about everything else that the general public sees as what is wrong with the “fat cats” flying around in private jets.

Personally, I believe they do a very poor job in picking their battles and this is one of them. Why even use up what little credibility they have when the country is trying to raise tax rates on the wealthy? The fact is that most owners don’t utilize their depreciation deductions because they are limited by the mount of personal use compared to business use….which is significant in most cases. It is simply a timing difference as instead of taking 50% of the depreciation in year one, the excess is taken over 7 or less years depending on whether they fly Part 91 or 135.

Do they really think the President, Democrats, or even Republicans are going to bat for them...or even take them seriously?

Does almost nothing for the fractional industry...minimal benefit for large corporations...and makes us industry proponents look like fools.

 

[Praetorian]

Insightful post. I'm pleasantly surprised.

 

[taxi1wire]

It is not about saving the wealthy tax money. It is about jobs!
Without the depreciation credit planes are not sold, jobs are lost and our whole industry suffers. NBAA is looking out for everyone, the owners, manufacturers and the users. What value would our fleet have without OEM's behind them?

 

[gret]

It is not about saving the wealthy tax money. It is about jobs!
Without the depreciation credit planes are not sold, jobs are lost and our whole industry suffers. NBAA is looking out for everyone, the owners, manufacturers and the users. What value would our fleet have without OEM's behind them?

Your view is correct and has worked before...but simply doesn't work anymore with private aircraft as the rules have changed drastically for deductions.

As mentioned, most of the depreciation deductions aren't even utilized because the aircraft isn't used predominately for business purposes. The deductions are lost so there isn’t a tax benefit. One can argue the percentage of personal use versus business use and the fact is that it is impossible to gather all the data nationwide. However, consider the busiest travel days for the fractionals...Thanksgiving, late December, and winter break in February…hard to argue that these are business trips.

In addition, there have been special tax rules in place for the past couple of years that allowed a purchaser to take 100% of the depreciation in the first year. Didn’t work based on the abysmal number of a/c that were delivered by the manufacturers. Deliveries by US manufacturers declined from 929 units in 2008 to 277 in 2011.

Cessna went from 456 to 183
Gulfstream from 68 to 21
Hawker from 160 to 30

Furthermore, the percentage of a/c delivered to US buyers declined from 83% to 57% of the market during the same period. It is only these a/c that would have been available for deductions for US tax purposes.

Tax incentives aren’t working in generating sales and won't if they can't be used. This is why the NBAA's asking for something that can't be utilized, except by a select few, doesn't seem prudent. Where were they with FET issues? $1 million was paid by NetJets for lobbying the FET law change earlier this year and the tax court case they are involved with where assessments are approaching $1 billion.

Not a pretty picture how you want to paint it.

 

[gret]

This report by the US International Trade Commissions...

"Business Jet Aircraft Industry: Structure and Factors Affecting Competitiveness"

http://www.usitc.gov/publications/332/pub4314.pdf

...is fascinating reading (250 pages) for those without a life, need to fall asleep, or really want to become ill about the status of our industry.

It appears we're in the soup and will be until we reach the next economic bubble.

 

[G4dude]

This report by the US International Trade Commissions...

"Business Jet Aircraft Industry: Structure and Factors Affecting Competitiveness"

http://www.usitc.gov/publications/332/pub4314.pdf

...is fascinating reading (250 pages) for those without a life, need to fall asleep, or really want to become ill about the status of our industry.

It appears we're in the soup and will be until we reach the next economic bubble.

The subject, with tax and writeoff ramifications, is not my area, but anything that lowers cost to purchasers, especially during sluggish economic times, is a good idea. Thanks for this informative thread. I wish the NBAA would prevail, but the issue will probably be a loser. We have UGLY times ahead, economically.

 

[Sparse]

Just remember what happened during Jimmy Carter's term on taxing luxury items. It decimated the yacht and boat building industry. Thousands of jobs lost. The aircraft manufacturing business is very fragile now. Anything reducing incentive on purchases will kill jobs. We need real tax reform not just a piece-mill approach, rather than going after segments that the majority of Americans, don't know or care about, except those working in them. To the factory workers in Kansas, Georgia, and now Florida, to the line guys all over the country, and all of those who support this industry in between, this is a huge deal.

They don't seem to be singling out luxury car manufacturers. The last time I checked, if you can afford a Tesla, you can probably afford to ride on a private jet yet Tesla gets huge subsidies from the taxpayers, which gives purchasers an incentive through a lower overall cost, which in essence accomplishes the same thing as accelerated depreciation.

I am rambling but I hope you get my point. The only way out of the problems we have is comprehensive tax and entitlement reform. None of us can have everything we want. There is enough pain to spread around.

 

[gutshotdraw]

Just remember what happened during Jimmy Carter's term on taxing luxury items. It decimated the yacht and boat building industry. Thousands of jobs lost. The aircraft manufacturing business is very fragile now. Anything reducing incentive on purchases will kill jobs. We need real tax reform not just a piece-mill approach, rather than going after segments that the majority of Americans, don't know or care about, except those working in them. To the factory workers in Kansas, Georgia, and now Florida, to the line guys all over the country, and all of those who support this industry in between, this is a huge deal.

They don't seem to be singling out luxury car manufacturers. The last time I checked, if you can afford a Tesla, you can probably afford to ride on a private jet yet Tesla gets huge subsidies from the taxpayers, which gives purchasers an incentive through a lower overall cost, which in essence accomplishes the same thing as accelerated depreciation.

I am rambling but I hope you get my point. The only way out of the problems we have is comprehensive tax and entitlement reform. None of us can have everything we want. There is enough pain to spread around.

Actually, that was Bubba Clinton that had the bright idea of a "luxury tax" and decimated the boat-building industry in the US. But your point is well taken.

 

[G4dude]

Just remember what happened during Jimmy Carter's term on taxing luxury items. It decimated the yacht and boat building industry. Thousands of jobs lost. The aircraft manufacturing business is very fragile now. Anything reducing incentive on purchases will kill jobs. We need real tax reform not just a piece-mill approach, rather than going after segments that the majority of Americans, don't know or care about, except those working in them. To the factory workers in Kansas, Georgia, and now Florida, to the line guys all over the country, and all of those who support this industry in between, this is a huge deal.

They don't seem to be singling out luxury car manufacturers. The last time I checked, if you can afford a Tesla, you can probably afford to ride on a private jet yet Tesla gets huge subsidies from the taxpayers, which gives purchasers an incentive through a lower overall cost, which in essence accomplishes the same thing as accelerated depreciation.

I am rambling but I hope you get my point. The only way out of the problems we have is comprehensive tax and entitlement reform. None of us can have everything we want. There is enough pain to spread around.

And the people who stoutly maintained the yacht industry would not be affected at all because the RICH have enough money anyway were absolutely wrong. They never admitted they were wrong, and are still in Congress right now trying to raise taxes on the rich and increase regulations on producers, using the same arguments. And ignoring the massive government debt that will pretty soon crash the bond market and trash people's pensions.

 

[G4dude]

Actually, that was Bubba Clinton that had the bright idea of a "luxury tax" and decimated the boat-building industry in the US. But your point is well taken.

Yep. It's sad to say, but I miss Bubba, given what we have in the White House now. Whoda thunk?

 

[Sparse]

Actually, that was Bubba Clinton that had the bright idea of a "luxury tax" and decimated the boat-building industry in the US. But your point is well taken.

My Bad. But I guess we are both wrong. It was signed by George H.W. "read my lips" Bush according to this article but the argument against it is the same.

http://www.jewishworldreview.com/cols/will102899.asp Interesting how Ted Kennedy offered up a fix including, shh "Taxxxx Creeedits". No not a democrat.


http://watchingamerica.com/News/94396/u-s-luxury-tax-—-a-total-failure/



http://www.boortz.com/weblogs/nealz-nuze/2011/jun/30/lesson-yacht-tax/

 

[rajflyboy]

Gret is pretty damn smart compared to the rest of us

 

[gret]

Gret is pretty damn smart compared to the rest of us

..not really as I can't sing or dance disco-

http://www.bodylanguagesuccess.com/2012/02/negotiation-nonverbal-communication_18.html

 

[BoilerUP]

As mentioned, most of the depreciation deductions aren't even utilized because the aircraft isn't used predominately for business purposes.

That might be true for a fractional, but is most certainly not true for many part 91/industrial aid flight departments.

 

[gret]

That might be true for a fractional, but is most certainly not true for many part 91/industrial aid flight departments.

You would think so...but they don't benefit as much as you think as they lose the deduction in proportion to the personal use of the a/c by executives compared to business use. Depending on the company, it is significant. Also, the tax benefits of the aircraft are usually not considered, except to rationalize the purchase...wink...wink. If the big guys want a plane, they go out and get one.

The other point is that many US companies don't have a heavy tax burden. The top ten earners in the US have an effective tax rate of 9%. Substantial earnings are not subject to tax (foreign operations) until brought back to the US and they aren't doing it in anticipation of a tax holiday being granted by our boys in Washington.

 

[BoilerUP]

You would think so...but they don't benefit as much as you think as they lose the deduction in proportion to the personal use of the a/c by executives compared to business use. Depending on the company, it is significant.

That's my point.

There are some operators that have 95% or more business use (my company is one) and for many those operators the tax benefits help a purchase decision...or help a purchase decision NOW vs. a year or two from now, which is the whole purpose of economic stimulus.

I'm not interested in an economic or tax policy debate as I am not a CPA, MBA and didn't stay at a Holiday Inn Express last night...just want to reinforce that one can't reasonably say that accelerated/bonus depreciation is a useless policy.

Some folks won't benefit from it, while others will - let's not make blanket statements (politicians are good enough doing that without our help) and throw the baby out with the bathwater.

And let's be honest - the ONLY reason to exclude aircraft from bonus depreciation (which is extended to any number of business-related capital purchases) is purely political...not monetary.

 

[gret]

Aircraft aren't being singled out, the provision affects all capital assets.

My point is that the NBAA uses what little political capital it has anymore on areas that provide little benefit or to fight battles it can't win...it would seem more prudent to hold back and lobby for more important items that affect private aviation and do it like grown ups.

The NBAA and NATA are not organizations that have a lasting impact on our lives one way or another...most aviation professionals only having a passing interest or knowledge about them....except for the salary survey of course... which is incredibly bogus

They are simply dues collectors who try and justify their existence by making noise about something that they really don't know anything about. Waste of any kind is bad.

 

[Flying Illini]

Aircraft aren't being singled out, the provision affects all capital assets.

My point is that the NBAA uses what little political capital it has anymore on areas that provide little benefit or to fight battles it can't win...it would seem more prudent to hold back and lobby for more important items that affect private aviation and do it like grown ups.

The NBAA and NATA are not organizations that have a lasting impact on our lives one way or another...most aviation professionals only having a passing interest or knowledge about them....except for the salary survey of course... which is incredibly bogus

They are simply dues collectors who try and justify their existence by making noise about something that they really don't know anything about. Waste of any kind is bad.

Interesting take. My company pays NBAA dues and this is a cause that is important to us so we are glad that NBaA is lobbying for it. An industry group should lobby for anything and everything that benefits their members. I'm curious, what is your background as I can't tell from your profile?

 

[gret]

Interesting take. My company pays NBAA dues and this is a cause that is important to us so we are glad that NBaA is lobbying for it. An industry group should lobby for anything and everything that benefits their members. I'm curious, what is your background as I can't tell from your profile?

Agreed, they should work on all matters that improve the private aviation industry. However, one has to choose the proper points to make and how to make them. Below are three pieces addressing the use of corporate owned aircraft...without laughing or being biased...who seems more credible and makes their points objectively, effectively, and without sounding condescending-


Corporate Jet Set: Leisure vs. Business

http://online.wsj.com/article/SB10001424052748703551304576260871791710428.html

NBAA Sample

http://www.forbes.com/sites/busines...-from-the-president-stings-business-aviation/

NATA Sample

http://www.nata.aero/PressRelease/default.aspx?id=85

It is also recognized that the heads of the NBAA and NATA have tough jobs trying to defend the indefensible (i.e. using the corporate jet (Falcon 2000 if I remember) to fly the CEO’s teenage daughter back and forth to California from Colorado on a weekly basis for a year so she can finish high school).

Too many examples of this that taint the entire industry and as usual, the exception is what gets the attention. It's kinda funny that many of the executives who abuse the situation laugh at the criticism and continue their bad behavior while we are trying to defend them so we can have jobs.

My background is primarily working patient intake at a meatpacking plant in Kansas and I’m trying to land a job as head of public relations at a national business jet industry group.

 

[JimNtexas]

I'm old enough to remember the 10% 'luxury tax'.

The same types of people who are now saying 'rich people don't really care about tax increases, they'll still buy planes and boats even if they cost a bit more' were saying it then.

The luxury tax was part of a tax comprise plan demanded by Democrats. It was going to help balance the budget and restore fairness to the tax code. Sound familiar?

People with rudimentary understanding of economics knew that when you raises taxes on something, you get less of that thing. Then as now, this simple concept fell on the deaf ears of the moocher class.

Even most conservative economic observers were shocked at the magnitude of the economic disaster caused by the luxury tax.

American custom boat building was pretty much wiped out, as sales of American made custom boats fell to almost zero. Custom boat building moved to Taiwan. Private aircraft sales of airplanes hit by the tax (those priced above $250000) were crippled.

It cost more to administer the luxury tax than the tax ever collected.

To give credit to Bubba, even though he promised higher taxes, he did help kill the insane luxury tax.

The same is about to happen again. Democrats are going to force insane tax hikes with the sole purpose of satisfying the emotional needs of the moocher class.

Most Democrat leaders (other than the Choomster) know that raising taxes during a recession will drive the economy deeper into the ditch, they don't care.

Senior Democrats will still get rich. They'll get jobs as 7 figure 'coordinators' in non-profits, subsidized green energy firms, or lobbying firms.

It's only the proles like you and me who will suffer.