White House Resurrects Call for Increased Bizjet Taxes

Following up on President Biden’s pledge to make corporate jet users “pay their share" and drawing ire from the business aviation community, the White House yesterday proposed a fivefold phased-in increase of the jet fuel tax for private users and lengthening the depreciation terms for business aircraft. Included in the President's Fiscal Year 2025 budget request, the proposal comes in addition to the White House directive for the IRS to step up audits of business aircraft users to make sure they are properly classifying business and private uses.

The Department of Transportation released a statement saying the budget proposes to “crack down on a corporate jet funding loophole.” Taking a page from past arguments surrounding the business aviation contribution to the National Airspace System, the DOT noted that the system “has largely been disproportionately funded by commercial air passengers.”

According to the agency, private jets account for 7 percent of operations handled by air traffic control but contribute just 0.6 percent of the taxes that make up the Airport and Airway Trust Fund. Plans would call for a phased-in fuel increase from the current 21.9 cents per gallon to $1.06 per gallon in fiscal year 2029 on jet fuel used by non-commercial operators. According to the DOT, "In the first year, the jet fuel tax would increase to 38.64 cents with a 16.84 cents per gallon increase in each subsequent year until 2029." This tax rate was believed to have been last raised in 1993; even adjusted for inflation, it would be 47 cents per gallon today.

Budget documents estimate that the increases would bring in an additional $44 million in FY2025, scaling up to more than $300 million in additional income by FY2029. It's unclear whether this tax increase encompasses all jet fuel used by non-commercial operators, regardless of the percentage that is derived from sustainable aviation fuel (SAF).

In addition, the budget would “eliminate a tax break that gives preferential treatment for writing off corporate jet purchases, compared to commercial aircraft.” This includes extending the depreciation length for business aircraft to seven years, matching that of airliners rather than the schedule of other business assets such as automobiles. The proposal comes as Congress is considering extending bonus depreciation. The White House estimates that its proposal would generate additional income ranging from $46 million in FY2025 to the peak of $217 million in FY2028.

The tax hikes come as the Airport and Airways Trust Fund now covers most of the FAA’s budget with the federal general fund contributing just 3 percent of the FY2024 appropriations.

Attempts to change the depreciation schedule and raise fuel taxes are not new. Former President Obama proposed tackling the depreciation schedule in 2011. And, business aviation organizations have in the past supported far more modest increases in fuel taxes instead of a user fee system.

However, the current proposals to go after the tax rate and depreciation schedule, coupled with the unleashing of audits and a slate of other potential corporate and wealth tax increases, have drawn outrage from business aviation organizations.

“The Biden administration’s sweeping plan would hurt business aviation and the jobs and communities that depend on it and make it harder for U.S. companies to compete in a global economy,” said NBAA president and CEO Bolen. “Among the proposals that single out business aviation for onerous treatment is a five-fold fuel tax increase, even though current fuel taxes already cover the incremental cost imposed on the aviation system. We urge Congress to tell the president that his gambit won’t fly with the citizens, companies, and communities that rely on business aviation.”

National Air Transportation Association president and CEO Curt Castagna agreed. “Business aviation is in the crosshairs again at a time when it is needed the most,” Castagna said. “The White House budget includes multiple provisions that mischaracterize the value of and would adversely affect the business and general aviation sectors, jeopardizing the jobs they provide and disregarding the critical services they support.”

Castagna said the administration instead should prioritize fostering business growth. But he also pointed to the diversion of aviation tax funds into the Highway Trust Fund to prevent fuel fraud efforts. “Unfortunately, the Biden Administration is proposing a tax increase it mistakenly believes will benefit the national aviation system," he said. "This is not the case. For nearly two decades now, Congress and the IRS have failed to address provisions in the tax code that allow for the HTF to erroneously keep billions of aviation tax dollars that were intended for the [aviation trust fund].”

General Aviation Manufacturers Association president and CEO Pete Bunce called the proposals disheartening and shortsighted. “[They] can set back our industry with consequences that harm our indispensable workforce, the very same men and women in the U.S. manufacturing sector that the Administration claims to emphatically support,” he said.

“The political soundbites of closing the so-called corporate jet loophole and drastically increasing the jet fuel tax, by nearly five times, does nothing more than harm demand for state-of-the-art aircraft that are called ‘business jets’ or ‘corporate jets’ for a specific reason...Why would the Administration want to hurt workers who make these aircraft or those communities that benefit from the jobs and/or mobility these vehicles enable?"

Bunce noted efforts of the industry to advance sustainable technologies and SAF. “The health and livelihood of our industry is dependent on having an effective, reliable, and conducive regulatory and business environment. These tax proposals go in the wrong direction.”