February 04, 2014
Credit: Architect of the Capitol
Lawmakers are heading toward the next significant budget debate as Congress faces a Feb. 7 deadline for addressing the debt ceiling. But, unlike most of the budget battles that have occurred over the past two years, it appears that discussions about raising taxes on business aircraft have been set aside for now.
Treasury Secretary Jack Lew on Feb. 3 warned that the temporary suspension of the debt limit is set to expire Feb. 7, and “in the absence of congressional action, Treasury will be forced to use extraordinary measures to continue to finance the government.”
Senate Democrats have been pushing for a simple increase of the debt limit. Senate Budget Committee Chairman Patty Murray (Wash.) on Feb. 4 urged Republicans to “give up their demands and raise the debt ceiling without any strings attached.” Republicans, meanwhile, appear amenable to the prospect of a temporary lifting of the debt ceiling, but have discussed certain bargaining chips, such as health care or the Keystone XL pipeline project.
A temporary extension would put off serious debate concerning potential tax increases and/or spending cuts, a debate that embattled lawmakers have little appetite to hold during an election year. For business aircraft advocates, the move would avoid a call for eliminating “corporate jet loopholes” or other potential tax increases, such as user fees.
The White House has consistently backed aviation user fees, but that concept has received almost no traction on Capitol Hill. However, more support exists for altering business aircraft depreciation schedules.
Top Democrats have joined the White House in highlighting business aircraft depreciation schedules as a key tax loophole that needs to be addressed to help reduce the federal deficit. While the actual money raised from a proposal to lengthen business aircraft depreciation schedules from five to seven years – matching that of commercial airliners – would make barely a dent in the deficit, the issue had become a symbolic one for Democrats trying to guard against cuts in programs such as Head Start.
The depreciation schedules were brought up repeatedly during the debates leading up to sequestration, and then as recently as in November by Senate Democrats, who reportedly had assembled a “list” of key tax increases that had business aircraft depreciation among the targets.
President Barack Obama has consistently pushed for an increase in depreciation schedules, and business aircraft advocates watched closely during last week’s State of the Union address to see if the proposal would resurface. Not only did he not mention it, but Obama touched upon tax increases in just a few areas. One involved IRAs, and another on “closing loopholes that help companies ship jobs overseas.”
This approach follows the bipartisan agreement that Democrats and Republicans reached in December to establish a framework for a budget deal with more modest spending cuts and tax increases. Aviation security fees were among the few tax increases included in that deal. The framework, however, marked a reversal of the ongoing rancor that led up to the onset of sequestration and the 16-day government shutdown in October.