When I worked as a TimeWarner division head (president of Reprise Records) I had a corporate jet at my disposal. I could have my secretary call an office that dealt with the jets— they had several— and tell them what time I needed it and where I was going and it would be gassed up and ready to do… with a full crew and plenty to eat and drink. How tempting does that sound for a perk? You know how many times I did that in all the years I worked there? None. Never. Not once. The idea made me furious; it made me want to puke.
Wasting all that money that should have gone towards promoting our artists! Causing all that extra pollution! Living like a king in a democratic society! I caught rides with some of my colleagues a few times— like maybe three times— and it was really convenient and comfortable and decadent. When corporate upper management instigated a corrupt— criminal, but no one was ever charged— “buy-out” by AOL, the new CEO came out to L.A. to talk about serious cost savings: firing people, drastically cutting employee health insurance benefits… that kind of thing. He also mentioned to senior management that this company would no longer be about the artists, the employees, or even the shareholders… it was our time to be rich. Everyone in the room was already rich, many very, very rich. He didn’t say anything about cutting back on private jet use.
It always made me sick that conservatives had rigged the tax code to drastically encourage private jet use by rich individuals and by corporations whose executives could easily disguise personal use tor legitimate business use. I’ve long wished the IRS would find a way to crack down. And yesterday, Laura Weiss reported how that is becoming a real thing… although, predictably, Republicans are rushing to prevent it by defunding the IRS enforcement division.
“The IRS,” wrote Weiss, “has a new message: Jetting around in a corporate plane? They’re watching. The agency announced it’s tapping a pot of funding from Democrats’ Inflation Reduction Act to launch new audits of large companies’ jet usage. ‘What we believe is happening is there’s not enough effective, ruthless record keeping going on and there is systemic overstating of the business deductions,’ IRS Commissioner Danny Werfel told reporters on a call, noting the record-keeping needed for getting it right on business jets is tricky. ‘That’s what we’re looking to tackle.’”
Even though the pot of IRA tax enforcement funding is shrinking, the IRS is undeterred. It’s forging ahead with new efforts to crack down on wealthy people and big corporations who aren’t paying taxes they owe— and looking to prove its boosted budget is worthwhile.
The new jet audits are targeted at two areas where the IRS believes there’s a good chunk of taxpayer money to claw back. The basic premise is executives, shareholders and other high-profile employees of big corporations or partnerships may use business-owned planes for a mix of business and personal travel.
The IRS believes some companies are taking business deductions for the aircraft without thoroughly carving out personal use. Plus, the agency’s hunch is that some executives and other employees aren’t reporting the business-provided travel as income.
The new examinations will start this spring and consist of an initial wave of three to four dozen fresh audits, according to Werfel.
More than 10,000 corporate jets operate in the United States, and their high value means they can represent tens of millions of dollars in tax deductions per plane, Werfel said. He added that given those stakes, the crackdown could bring in a significant amount of revenue.
The agency, which is using analytics to inform its probe, could expand audits depending on what it finds in this initial wave.
Werfel added that the IRS will have more to say in the weeks to come about its enforcement push. The agency is hiring more staff and investing in better analytics and AI to target time and resources.
Keep in mind that corrupt conservatives— bribed by several industries— have written the e tax code to encourage private and corporate jet use is through depreciation rules which allow businesses to deduct the cost of assets over time, including the cost of purchasing or leasing aircraft. The tax code provides favorable depreciation schedules for business aircraft, allowing owners to recover the cost of the aircraft more quickly through tax deductions. On top of that, businesses are generally allowed to deduct the expenses incurred in the operation of the business, including the easily abused expenses related to business travel. That includes the cost of operating and maintaining corporate jets, such as fuel, maintenance and pilot and other crew salaries. These deductions incentivize businesses to invest in corporate jets for executive travel and other business purposes. The notorious Section 179 of the tax code allows businesses to deduct the full cost of certain qualifying property, including aircraft, in the year it is placed in service, rather than depreciating it over time. This provision can provide significant tax benefits for businesses purchasing or leasing aircraft.
On top of that, conservatives rigged the tax code to give exemptions for the personal use of corporate aircraft by employees and executives. While personal use of corporate aircraft is generally considered taxable income to the employee or executive, there are widespread exceptions and carve-outs in the tax code that can reduce or eliminate the tax liability associated with personal use. Republicans, knowing full well that their base is too stupid to understand when it’s being played call these policies “job creation,” claiming that tax incentives for private and corporate jet use can help support these jobs and contribute to economic growth. These tax incentives for private and corporate jet use reduce government revenue and contribute to budget deficits, particularly if the cost of these incentives outweighs the economic benefits generated by the aviation industry.
What do these policies really do? That should be obvious to anyone who isn’t part of the MAGA base— subsidies for the wealthy— luxury travel at taxpayer expense. And then there’s the little fact that corporate jets emit greenhouse gases and contribute to air pollution, exacerbating an existential climate crisis.
Last year, our friends at Patriotic Millionaires put together a report that has become a must read for anyone looking at this topic. In their intro, they noted that “Private jets have rightfully earned their reputation as symbols of excess. As society’s wealth has concentrated in fewer hands over the last several decades, there has been an explosion in private jet purchases and travel. This expensive, carbon-intensive form of travel is bad for both the earth and the taxpayers who subsidize it for the ultra-rich… Billionaire Elon Musk, to take one example, took one private jet flight about every other day in 2022, producing 2,112 tons of carbon dioxide emissions last year alone. That’s 132 times more than the entire carbon footprint of an average individual in the United States. That’s why lawmakers in a number of countries are now preparing to levy new taxes on the sale of private aircraft, short flights, and related emissions.”
Among their key findings:
Private jets emit at least 10 times more pollutants than commercial planes per passenger.
Approximately 1 percent of people are believed to be responsible for about half of all aviation carbon emissions.
In addition, since the start of the pandemic, private jet use has increased by about a fifth and private jet emissions have increased more than 23 percent, according to a recent study.
Private jets make up approximately one out of every six flights handled by the Federal Aviation Administration (FAA) but contribute just 2 percent of the taxes that make up the trust fund that primarily funds the FAA.
Instead, the majority (roughly 70 percent) of the tax revenue that makes up the aviation trust fund is financed by passengers purchasing commercial air travel.
Commercial passengers pay a 7.5 percent tax on the prices of their tickets plus a passenger facility charge of no more than $4.50. Passenger taxes are increasing as flight prices increase.
Meanwhile, private jet fliers only pay fuel surcharge taxes — roughly $0.22 per gallon of jet fuel.
The median net worth of a full and fractional private jet owner is $190 million and $140 million respectively.
They represent 0.0008 percent of the global population.
The jet-owning oligarchy is overwhelmingly male, over the age of 50, and concentrated in the industries of banking, finance, and real estate.
The private jet sector set industry records with regards to transaction and dollar volume in 2021 and 2022.
The size of the global fleet has increased 133 percent in the last two decades from 9,895 in 2000 to 23,133 in mid-2022.
This bonanza was accompanied by an unprecedented number of business jet operations, 5.3 million in 2022.
A 10 percent and 5 percent global transfer fee on pre-owned and new private aircraft, respectively, would have raised $2.4 billion in 2021 and $2.6 billion in 2022.
The size of the private jet market grew from $32.3 billion in 2021 to $34.1 billion in 2022, with the market only set to expand.
Elon Musk would pay an additional $3.94 million in taxes if our recommended transfer fee and jet fuel tax were implemented.
He is one of the most active high flyers in the United States. He purchased a new jet, took 171 flights, contributed to the consumption of 837,934 liters of jet fuel, and was responsible for 2,112 tons of carbon emissions in 2022.
Thousands of municipal airports in the U.S. are funded by the public, but many primarily serve private and corporate jets.
These airports may not offer scheduled passenger service, but they still offer airport runways subsidized by taxes.
The largest player in the private jet lobby, the National Business Aviation Association, has spent an average $2.4 million each year since 2008 lobbying the federal government, primarily for tax giveaways.
During the COVID-19 pandemic, the industry specifically lobbied for Covid relief, particularly “medium to long-term liquidity assistance and relief from air transportation excise taxes,” even though industry demand was quickly climbing.
The wealthy can transfer ownership of their jets to a private trust, obscuring the true ownership of the aircraft.
In an age where commercial passengers must take off their shoes to be screened and fly, beneficial ownership of aircraft presents a fully legal yet significant security risk.
While sustainable aviation fuels (SAFs) have a role to play in reducing aviation emissions, they should not be considered a panacea by the private jet industry.
SAFs still release emissions, though less than traditional fuels, and they are currently expensive and rarely used.
Their recommendations are the gold standard for what must be done, noting that “For climate reasons, the U.S. needs to pass policies that disincentivize the use of private jets. And to level the playing field between the wealthy who use private jets and the passengers who must use commercial aviation, Congress must require that private jet owners pay their fair share for airspace and airport services. Lawmakers should consider a number of reforms to fix this broken system.”
1. Implement a global transfer tax on all private jets.
We recommend a 10 percent sales tax on all preowned private aircraft and a 5 percent tax on new aircraft transactions.
According to Global Jet Capital, the total dollar volume of preowned and new private jets in 2022 was $19.1 billion and $15 billion, respectively. This is a total of $34.1 billion. Our recommended transfer tax proposal would yield approximately $2.6 billion in revenue for 2022. Elon Musk’s tax obligation would be $3.9 million if this fee was applied to his new $78 million jet purchase.
2. Levy a private jet fuel tax.
The European Union is seeking to meet more than half of its climate goals within the next seven years by finally levying a tax on jet fuels on all intra-EU air travel. The “Fit for 55 Plan” will nearly double the cost of jet fuel and it is currently being discussed by EU member states.
The United States already levies a federal excise tax on general aviation fuels, but an additional duty on private jet fuel consumption can raise funds that can go towards a sustainability fund, reduce unnecessary flights, or encourage the high flyers to consider alternative forms of transportation.
Doubling the federal jet fuel tax from $0.219 per gallon to $0.438 per gallon for the high flyers would be a good place to start. It is a tax that only applies to those who sit at the very top of the wealth distribution.
Musk’s private aircraft consumed 837,934 liters of jet fuel— that is, approximately 221,358 gallons. Our recommended rate would raise about $96,954.80 from his private jet activity last year.
3. Institute a “short hop” surcharge.
The purpose of a short hop tax is to disincentivize private jet owners from taking ridiculously short flights, especially when other transportation options are available. Belgium has begun to lead the way by instituting a €10 duty per passenger on all flights shorter than 310 miles.
Representative Steve Cohen of Tennessee is introducing legislation that seeks to levy an excise tax on the miles traveled by private aircraft. We recommend instituting a “short hop” surcharge on any private jet operation where the distance between the two destinations is less than 210 miles. This is approximately the distance between New York City’s JFK airport to Washington D.C.’s DCA airport.
Any private flight shorter than 210 miles will be subject to a duty and a higher tax rate should be applied to all private flights where the destination is shorter than 100 miles away. Our definition of a “short hop” flight is consistent with the standard established by Belgium, where their tax regime will apply to very short-haul flights.
4. Resist efforts to increase passenger facility charges until private jet owners pay their fair share.
If additional funds are required to upgrade our nation’s airports, additional revenue should come first from the private jet industry, not from increasing costs on ticket prices for ordinary commercial jet flying consumers.
5. Create a sustainable transportation equity trust fund.
The creation of a fund that captures the revenue raised from increased taxes and fees on private jet travel is absolutely necessary. The fund can then direct resources towards sustainable transportation equity projects that would increase light rail, city-to-city rail, cycle tracks and bike lanes, and other non-emission burning transportation infrastructure.
Representative Cohen’s draft legislation establishes a sustainable aviation trust fund upon the bill’s passage.
6. Increase TSA security oversight of private jets.
Eliminate the “self-regulating” features of private jet security with greater TSA oversight of private jet security.
7. Pass the Aircraft Ownership Transparency Act.
The public and law enforcement have a legitimate interest in knowing who are the beneficial owners of private jets. The FAA should have a more complete picture of who owns private aircraft prior to approving a certificate of registration in the United States.
