President Obama has proposed a $100 per flight tax on turboprop and turbojet business aircraft operating in the United States. These fees would be in addition to the current taxes, collected through a tax on aviation fuel, and increase the cost of using business, and personal, jet aircraft. As other countries have discovered when implementing similar fees, the impact on aircraft utilization can be significant, and travel volumes decline. For an industry already suffering from a recession, particularly at the low end of the market, this will be devastating.
Of course, this timing comes just as new general aviation aircraft, the Eclipse 500, Cessna Mustang and Embraer Phenom 100 have been introduced, and smaller forthcoming Cirrus ST-50 and Diamond D-Jets aimed at the small business and owner flown market, are being designed. Under this proposal, they will pay the same rate as a large Gulfstream or Boeing Business Jet that are an order of magnitude larger in size, and environmental impact. In addition, a new government bureaucracy will be needed to collect and account for these new taxes (disguised as user fees) which depart from today’s fair and simple method – based on the amount of fuel used.
Today’s system is fair, as large aircraft burn more fuel than small aircraft, and a fuel tax is also directly related to emissions, making an ideal tool to utilize for environmental regulation as well. A new flat tax per flight will be cumbersome, and will have unintended consequences in reducing employment, rather than increasing it.
A $100 per flight surcharge nearly destroys the economics of the Cirrus ST-50 or Diamond D-Jet, which are aimed at the owner flown market, and will have relatively low hourly operating costs. With operating costs for these jets anticipated to be quite low – between $1 and $1.50 per mile, this would represent a 20% tax on a 500 mile trip. We all know what happens in free market economics when 20% price increases occur – volume drops.
This proposal is not only ill-timed, given the high unemployment and recession for the industry, but poorly constructed, impacting owner-flown and medium sized companies proportionately more than large companies that pay the same flat rate for larger aircraft. If more revenue is needed, increase the fuel tax, and share the load proportionally among all users on a fair basis – based on their environmental impact.
We normally refrain from discussions of political issues in this blog, but this proposal is so absurd and focused on apparent “pet-peeve” of the President – those who fly on business jets. He seems to have forgotten that those folks create a lot of jobs in aviation, in Wichita and other aircraft manufacturing centers, at FBOs across the country, and in every community into which they fly. While we haven’t been happy with Congress and either party, we hope that somebody in Washington shows some common sense and kills this proposal so we can maintain, rather than destroy, jobs in general aviation.