Private-Plane Taxes: Another Way The Poor Subsidize The Rich

Wealthy CEOs and athletes have found a loophole that allows them to minimize their tax bills while traveling in style – all at the expense of the everyday traveler who flies commercial and must bear an outsize percentage of aviation taxes in the US.

According to a Bloomberg analysis of government data, operators of private jets pay far less in taxes than airline passengers and other commercial flyers. On a per flight basis, a private jet could generate as little as two percent of the taxes and fees paid by airline passengers on an identical route. Private planes make up about 10 percent of US flights under air-traffic control, yet pay less than 1 percent into a trust fund that finances air-traffic control and other Federal Aviation Administration operations.

Sports teams like the New England Patriots are increasingly investing in private jets to take advantage of these cost-savings, Bloomberg reported.

Of course, after years of declining prices, buyers of private jets can easily get a good deal if they’re willing to buy used. Sales prices for used jets have fallen as much as 35% over the past three years, with the average price falling from $13.7 million in April 2014 to $8.9 million today.

Bloomberg’s analysis prompted some aviation experts to complain that private-jet owners aren’t paying their fair share of taxes.

"By and large, a private aircraft costs the same for the FAA to process as a large aircraft," said Michael Ball, senior associate dean at the University of Maryland’s Robert H. Smith School of business and co-director of an aviation research consortium. "If you look at it from that standpoint, they clearly aren’t paying their due.”

Private-jet owners, unsurprisingly, must have an army of powerful lobbyists in their employ, because, as Bloomberg explains, the US system where private owners are exempt from the bulk of taxes that commercial airlines pay is different from the system used by most of the rest of the world.

“Unlike most of the rest of the world, which charges fees based on aircraft weight and distance flown, the taxes private jets in the U.S. pay are different from the ones imposed on airlines.

 

Private aircraft operators pay 21.8 cents per gallon of jet fuel. By contrast, airlines and charter operators have three separate taxes: an excise tax of 7.5 percent on tickets or charter charges, a fee of $4.10 per passenger and 4.3 cents per gallon of jet fuel.”

This means that airline passengers are effectively subsidizing some of the world’s largest corporations and wealthiest people under the current system, said Matthew Gardner, a senior fellow at the nonprofit Institute on Taxation and Economic Policy.

"Pretty clearly, we all feel the pain every time we buy an airline ticket and see how big a share of the costs those fees are," Gardner said.

Indeed, the disparity in taxes for comparable private and commercial flights can be staggering:

“A transcontinental flight from New York to Los Angeles on a Virgin America Inc. Airbus SE A320, would be charged about $3,900 in taxes, assuming the plane was 85 percent full and passengers paid the average fare calculated by the Transportation Department’s Bureau of Transportation Statistics.

 

The tax bill for a flight between the same cities on a privately owned Bombardier Inc. Global 6000, one of the world’s longest range corporate jets, would be about $525. That’s about 87 percent less than the airline flight.”

And the differences can be even larger if the private plane is a smaller model that burns less fuel.

“A trip from Nashville, Tennessee, to Philadelphia by Southwest Airlines Co., which typically uses a Boeing Co. 737-700 on that route, would typically be charged more than $2,000 in taxes. An Embraer SA Phenom 100E, a smaller and more fuel efficient corporate jet, on the same leg would be assessed about $50, or roughly 2 percent of the Southwest plane.”

Putting their total tax contribution in context, private business plane owners contributed just $104 million to the FAA’s trust fund in 2016 – that amounts to just 0.7 percent of the overall aviation taxes paid that year.

“The FAA estimated that these business planes contributed $104 million to the trust fund in 2016. That amounts to just 0.7 percent of the overall aviation taxes. That compares to 92 percent of the tax payments, or more than $13 billion, that came from U.S. carriers, foreign airlines and charter carriers -- most of which were paid directly by passengers.”

And thanks to their army of lobbyists, private jet owners have virtually guaranteed that the tax disparity will persist.

“Any potential changes in the taxes on private aviation were effectively taken off the table this year by the powerful chairman of the House Transportation and Infrastructure Committee, Pennsylvania Republican Bill Shuster.

 

In order to mute opposition to his plan to create a nonprofit company to operate the air-traffic system, Shuster’s bill would keep the current tax levels for private planes. Shuster’s attempt to mollify private plane owners has had little effect as they continue to oppose his proposal. The bill has passed the committee and is awaiting a vote before the full House.”

As one expert pointed out, if the purpose of the FAA’s tax system was to evenly distribute costs for maintaining the US’s aviation infrastructure among its users, than the current system is an abject failure.

“If the purpose of aviation taxes is to create an equitable way to pay for the air-traffic centers, computers and radars, the existing system is a failure, said Robert Frank, a professor at Cornell University’s Johnson Graduate School of Management.

 

“It doesn’t sound like this fee structure comes even close to imposing fees on the costs respective users impose on the system,” Frank said."

But hey…like they say, life isn’t fair.

Comments

Stackers Blue Steel 309 Fri, 09/08/2017 - 08:11 Permalink

A bunch of socialist horse shit if I ever read it.They left out the rental and hanger leasing fees to the giant FBO's that service these private planes which generate a crap load of revenues for local airports.I would also like to see some fact check citations on this "10%" of all traffic as well. How much of that 10% is truly "rich" private jets and how much of it are small general aviation planes flown by middle class america ?The same system would have to be put in place and paid for regardless if private jets used it or not. So the "subsidizing" the rich argument is bunk to begin with. If you removed 1 in 10 planes from the sky this would do nothing to reduce the overall cost of operating the current airtraffic control system.On a per seat per mile cost basis flying in a private jet is about as far from cost effective and efficient for a corporation or "rich" person as it is possible to get and the $20 saved in "taxes" is nothing compared to $2,000 in fuel cost.

In reply to by Blue Steel 309

jcaz Stackers Fri, 09/08/2017 - 09:05 Permalink

Yup- guess I missed the memo that I am "taking advantage" by flying my own plane.My last trip was about 1100 miles.   When I landed,  I refueled-  almost 300 gallons of Jet A at $6/ga,  figure at least 1/3rd of that is tax,  so there's $600 just in taxes I paid- that's out of MY pocket,  not the "little people"- for just one flight.That flight also ran nearly 3 hours-  the service plan on my engines runs about $1000/hr,  so there's another $180 in tax....  And of course I got nicked for landing fee taxes,  tie-down fee tax,  step-on-the-crack fee tax that every airport charges....  I'm not bitching, these are just taxes the author of this article failed to account for-  unfortunately, the real world never fails to account for them.I don't fly because I'm taking advantage of any "loopholes"- there are none.   The only "loophole" here wrote this article.  I fly because it's productive and puts me in a position to pay even MORE taxes-  yay me.Who the fuck is this socialist twat pretending to be Tyler???

In reply to by Stackers

I am more equa… White Devil Fri, 09/08/2017 - 07:30 Permalink

 This is a retarded article.  ZH must have needed content this morning because this falls deep into class envy.Commercial airlines are akin to Greyhound bus travel of the 70's.  The only thing missing are the runaways and pimps at the airport/bus station. The pimps were replaced by TSA agents.  The runaways are too busy playing some useless game on their iphone 6/7/8/9 to realize they are still miserable

In reply to by White Devil

jcaz I am more equa… Fri, 09/08/2017 - 08:00 Permalink

Yep- not sure what tree-hugger actually wrote this article, but it's a little light on basic econ and common sense;Hiring late-night staff from Yahoo Financial again, Tyler?The tax IS proportional,  per passenger- in fact, by the time you factor in the extraneous taxation for a private jet NOT listed in this article,  it flips the equation the other way-  check out landing and overnight fees plus taxes, you'll love those;Try again Tyler- ask someone who pays the bill for the private jets you so readily disparage.

In reply to by I am more equa…

Withdrawn Sanction Mentaliusanything Fri, 09/08/2017 - 06:47 Permalink

"less per passenger?"

Good point. Also, upon landing for example, which aircraft exerts more force on the runway infrastructure, a jumbo jet or a 6 passenger jet?

Besides, what chump actually believes the airport trust fund is administered for the benefit of the flying public? That money is collected, thrown into the general fund, and spent on whatever bill happens come due at that moment.

This is just another us-vs-them (divide and conquer) article. Keep your eyes fixed on the real enemy.

In reply to by Mentaliusanything

ihatebarkingdogs Fri, 09/08/2017 - 04:13 Permalink

The best LEGAL way to avoid a tax is don't incure it. In this case, don't buy a ticket, and you don't pay any of the surcharges (taxes) or support TSA or any of the .gov involvement. Don't make the trip.

wisehiney Fri, 09/08/2017 - 04:38 Permalink

https://www.youtube.com/watch?v=2dGoKgSknukDig these lyrics homies.Keith wrote this about Gram Parsons.His friend from the desert.Listen closely and learn.Did you know that Gram wrote "Wild Horses" and more.Rock, blues and the Bastards Always Said They Were The Greatest Rock And Roll Bank Of All Time.Of Course They Are.LyricsWorked the bars and sideshows along the twilight zoneOnly a crowd can make you feel so aloneAnd it really hit homeBooze and pills and powders, you can choose your medicineWell here's another goodbye to another good friendAfter all is said and doneGotta move while it's still funLet me walk before they make me runAfter all is said and doneI gotta move, it's still funI'm gonna walk before they make me runWatched my taillights fading, there ain't a dry eye in the houseThey're laughing and singingStarted dancing and drinking as I left townGonna find my way to heaven, 'cause I did my time in hell, oh yeahI wasn't looking too good but I was feeling real wellOh after all is said and doneI gotta move I had my funLet us walk before they make us runAfter all is said and doneI did alright, I had my funBut I will walk before they'll make meI will walk before they'll make me (run)I will walk before they'll make me (run)I will walk before they'll make me runSo if it's all been said and doneI gotta move I had my funLet me walk before they make me runSo let me walk before they make me runI want to walk before they'll make me run

sinbad2 Fri, 09/08/2017 - 04:37 Permalink

It's the corporate socialism(capitalism) that Americans love, the only problem is working Americans are not paying enough tax to keep the ruling class in the manner to which they are accustomed.Work harder, Zuckerburg needs your money.

Blue Steel 309 sinbad2 Fri, 09/08/2017 - 06:44 Permalink

STFU plebe. Corporations are people!

They are people that are not subject to criminal law and (((SCOTUS))) says this is just, so it is.

I am starting to notice a lot of thought crime around here. And I will report it to Google if you people don't start toeing the party line.

In reply to by sinbad2

desirdavenir Fri, 09/08/2017 - 04:47 Permalink

Those taxes are to be divided by the number of passengers to get a fair comparisons. I don't mind the rich paying taxes in general, but this looks like a strawman erected just to show that republicans "care" about the poors while in effect doing nothing...

Canoe Driver Fri, 09/08/2017 - 04:52 Permalink

If you tax the private flights at the same rate as airliners, you force a large cohort of private jet flyers into first class commercial airfares. Simple, and obvious.

Benjamin123 Canoe Driver Fri, 09/08/2017 - 05:41 Permalink

How is that obvious? Why would anyone with a private jet switch to an airline because of some tax?We are talking millionaires and important CEOs here. The jet set. These people fly on private jets because its convenient, for their own reasons (mostly, its prestigious and they save time), not cheap. First class is fundamentally the same as coach. So the meals are better and the seats wider... Still it will never be as good or convenient as a private jet.

In reply to by Canoe Driver

dishman1966 Fri, 09/08/2017 - 06:27 Permalink

Would like to see an opinion from someone who is expert and thinks the system is fair and why they think it's fair.   From the article it isn't but everyone has an axe to grind when writing nowadays.

Last of the Mi… Fri, 09/08/2017 - 06:48 Permalink

When you consider their light weight and lack of damage to runways and other infrastructure usage they probably should pay about .0001% of what the commercial airlines do. An 80,000 lb 18 wheeler does a lot more damage to the roadway than a 4000 lb car. Same with planes.

Stinkytofu (not verified) Fri, 09/08/2017 - 06:54 Permalink

"“The FAA estimated that these business planes contributed $104 million to the trust fund in 2016. That amounts to just 0.7 percent of the overall aviation taxes." so the gub'mint takes in according to my pubic school math....about $15 billion in taxes annually? trust fund?  bwahahahahah!!!!!!!!!!!

Weirdly Fri, 09/08/2017 - 07:06 Permalink

And what do commercial airlines get for their fees?  A terminal building with millions of square feet on some of the most valuable real estate in a city?  And private planes?  Asphalt.  It is a bullshit story looking to generate hits. 

Cardinal Fang Fri, 09/08/2017 - 07:41 Permalink

This article reeks of Obama era anti-industrial rhetoric.

The only thing we fucking manufacture and export are aircraft.

Let's kill that one industry we have left.

Lol

Luddites and academics

Never built a fuckin machine in their lives.

brushhog Fri, 09/08/2017 - 08:52 Permalink

The big lie here is that private planes are all owned by "the rich". Lots of people fly small prop planes, especially in remote areas like Alaska, Maine,  Montana, upper Minnesota, and etc. These people arent rich they need those small aircraft to travel in and out of undeveloped areas. There are also alot of flying enthusiasts that are regular, middle class people with a love of flying who make sacrifices in other parts of their lives so they can afford to do what they love.Be aware of this kind of class warfare bullshit. It always starts with a misguided presumption, designed to appeal to the emotion of envy, and builds from there.

DonFromWyoming Fri, 09/08/2017 - 11:21 Permalink

Tylers - It appears your esteemed web site articles are now being authored by social justice warriors.  Much more of this and I will erase you from my bookmarks and stopping reading your web site.

21st.century Fri, 09/08/2017 - 12:47 Permalink

FairTax (or something similar ) will fix this .  Tax everyone the same .  Make warren buffett be the tax collector with his NetJets .  Tax the cost of the seat-- or private jet rentalstop taxing the meager wages of the single mother that takes the reservation for the private jet rental. a private jet owner will pay the FairTax on the fuel That's the way you "tax the rich" - tax the lifestyle  .... and at the same time-- finally do something FOR citizens.That would also tax things like the clinton "charity"  ... they would pay the tax too.... as opposed to supporting the lifestyles of the charity and foundation owners.. as being tax exempt..and the cost of the private jet is an "expense" to be deducted .that would be "fair"

JelloBeyonce Fri, 09/08/2017 - 12:55 Permalink

Brooke Harrington, a sociologist at the Copenhagen Business School in Denmark. She decided several years ago to explore the secret lives of billionaires by conducting about 65 interviews with Wealth Advisors in 18 countries. She took an unusual path to enter this world. She herself trained to become a wealth manager. BROOKE HARRINGTON: The lives of the richest people in the world are so different from those of the rest of us, it's almost literally unimaginable. National borders are nothing to them. They might as well not exist. The laws are nothing to them. Theymight as well not exist.HARRINGTON: So you have to have.........a very high tolerance for people who would otherwise seem to be so extremely privileged that you might be otherwise inclined to smack them around and say snapout of it, you're lucky. HARRINGTON: But at one level, the fact that they are so rich gives them these very important things in common, which is to say, for them, national boundaries and laws are all optional. Taxes are optional. All forms of law are essentially optional at that level of wealth. http://www.npr.org/2016/10/25/499213698/whats-it-like-to-be-rich-ask-th…

darteaus Fri, 09/08/2017 - 13:23 Permalink

FTA: "...investing in private jets to take advantage of...cost-savings."BWA-HAHAHA.  Another "KILL THE RICH" screed.Anyone "investing in private jets" does so to avoid the issues of TSA, commercial flights, charter companies, etc.  That is, they do it to SAVE TIME, not money.  That is the ONLY reason.Everything that happens with an aircraft is EXPENSIVE.  Changing the oil (6qts) in a Cessna 172 runs $100+.  Insurance?  Property tax [yes local governments charge property tax on aircraft based in their juristictions]?  Tie down? ANNUAL inspection - wheter you fly or not [Gee mr. rich guy, I found a problem with your..."]?  Something goes wrong - guess whose ass the government is coming after [now you have liabilities to passengers, people on the ground, etc.]?  etc, etc, etc.Yeah, great way to save money. /sLook at all the airlines, aircraft manufacturers, aircraft equipment makers that have gone broke over the last 40 years.Yeah, pouring money into aviation will get you rich. /s

surf@jm Fri, 09/08/2017 - 13:49 Permalink

Who let a democrat in here to write a class warfare piece?.....Taxes must be raised to make it fair?......Is that you Bernie?.......